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Financial report / Arizona State University

Financial report 1998

FINANCIAL REPORT 1998
Pictured on the cover is the Student Services Building located on the ASU Main Campus in Tempe. The Student Services Building houses many of the nonacademic offices which assist students on a daily basis. Among the offices located there are the offices of student financial assistance, registrar, student employment, tuition payment, cashiering services, undergraduate admissions, residency classification, career services, and counseling and consultation. ASUs student body represents all 50 states as well as more than 115 different nations. ASU students include Truman Scholars, Woodrow Wilson Scholars, Marshall Scholars, Goldwater Scholars, a Rhodes Scholar, Fulbright Fellows, National Merit Scholars, Arizona Regents Academic Scholars, Flinn Scholars, Medallion of Merit Scholars and Leadership Scholars - as well as numerous other scholarship, fellowship and grant recipients. Special thanks to the ASU Office of Undergraduate Admissions for the use of the photograph featured on the cover.
ARIZONA BOARD OF REGENTS EX OFFICIO
Jane Dee Hull, Governor of Arizona Lisa Graham Keegan, Superintendent of Public Instruction APPOINTED George H. Amos III Rudy Campbell Judy Gignac Chris Herstam Jack Jewett Kay McKay John F. Munger Jennifer Reichelt Don Ulrich
ARIZONA STATE UNIVERSITY ADMINISTRATION
Lattie F. Coor, President Milton D. Glick, Senior Vice President and Provost Elaine P. Maimon, Provost and Vice President for ASU West Charles E. Backus, Provost for ASU East Christine K. Wilkinson, Vice President Allan H. Price, Vice President for Institutional Advancement Mernoy E. Harrison, Jr. Vice Provost for Administrative Services
Gerald E. Snyder, Comptroller and Treasurer
FINANCIAL REPORT
1998
CONTENTS
ARIZONA BOARD OF REGENTS AND ARIZONA STATE UNIVERSITY ADMINISTRATION....................................................................... 2
F I N A N C I A L HIGHLIGHTS................................................................................................
4-5
ENROLLMENT...................................................................................................................
6
P E R C E N TA G E COMPOSITIONS......................................................................................
7
C O M B I N E D SOURCES AND USES OF FUNDS...............................................................
8-9
B A L A N C E SHEET..............................................................................................................
10
S TAT E M E N T OF CHANGES IN FUND BALANCES.........................................................
12
S TAT E M E N T OF CURRENT OPERATING FUNDS REVENUES, EXPENDITURES, AND OTHER CHANGES................................................
14
S U M M A RY OF SIGNIFICANT ACCOUNTING POLICIES...............................................
15
N O T E S TO FINANCIAL STATEMENTS...........................................................................
16
I N D E P E N D E N T AUDITORS REPORT..............................................................................
20
Arizona State University 3
FINANCIAL HIGHLIGHTS
Funding Sources and Uses
Funding Sources(Resources acquired during the year) State Appropriations Tuition and Fees Gifts, Grants, and Contracts Auxiliary Enterprises Operations Other Sources Total Funding Sources Funding Uses(Resources consumed during the year) Instruction and Academic Support Research and Public Service Student Services and Institutional Support Operation and Maintenance of Plant Auxiliary Enterprises Operations Scholarships and Fellowships Facility Additions, Debt Service, and Other Uses Total Funding Uses $ 297.3 85.4 79.9 37.4 62.7 63.0 65.3 $ 691.0 $ 275.8 78.1 71.6 35.9 59.4 54.7 64.3 $ 639.8 8% 9 12 4 6 15 2 8%
Fiscal Year 1998 1997
(Dollars in Millions) $ 287.2 177.2 137.0 75.0 42.6 $ 719.0 $ 260.0 162.9 124.6 71.0 35.6 $ 654.1
Percentage Change
10 % 9 10 6 20 10 %
The above table is an overview of total University financial operations; current operating and non-operating funds are included. Total funding sources increased 10% due to increases in all funding source categories. The largest percentage increase was the 20% increase in other sources primarily due to a one-time $5.5 million net increase in fair value in the endowment fund related to prior years. This was the result of ASU adopting for fiscal 1998 Governmental Accounting Standards Board (GASB) Statement No. 31, which became effective for fiscal 1998. GASB Statement 31 requires that investments be reported at fair value which is typically the quoted market price rather than at cost. The endowment fund also recorded $6.6 million of net increase in fair value relating to fiscal 1998 activity, a $1.2 million increase over fiscal 1997. The state appropriations category increased 10% due to a $23.1 million increase in the general operating fund appropriations and a $4.1 million increase in capital outlay appropriations. The increase in the general fund appropriations was primarily to support instruction related expenditures in the colleges related to enrollment growth and various strategic initiatives. The gifts, grants and contracts category increased 10% due to increased federal and state grants as well as a small increase in private gifts. Federal grants increased $8.7 million due to a $2.0 million funding increase by the National Science Foundation affecting various projects as well as a $1.1 million funding increase by the Jet Propulsion Laboratory/NASA for the Mars Observer and Global Surveyor Thermal Emission Spectrometer Project. There were numerous other federal grants which received funding increases of less than $1.0 million. Federal Pell financial aid grants increased by $1.3 million. There was a $2.2 million increase in state grants primarily due to increased funding for tobacco education and prevention programs revenues. Tuition and fees increased 9% due to increases in enrollment growth for both in-state and out-state students, as well as increases in the rate charged for tuition and fees. The increase in tuition was used to address institutional needs not covered by the general operating fund appropriations as well as to increase funding for university scholarships and grants. The auxiliary enterprises operations category increased 6%, or $4.0 million, primarily due to revenue increases for Public Events, Bookstore, Memorial Union and Parking. Public Events revenues increased $1.3 million as the result of a highly successful season for Valley Broadway Series events at ASUs Gammage Auditorium. Shows staged at Gammage Auditorium during fiscal 1998 included Showboat, Rent, Lord of the Dance, and Chicago. 4 Arizona State University
Total funding uses increased 8% between years with increases in all categories. The scholarships and fellowships category had the largest increase, 15%, primarily due to increases in tuition waivers and in scholarships and financial aid grants awarded, including an increase of almost $1.0 million in a university funded scholarship program for undergraduates enrolled at ASU who graduated in the top 15% of their high school senior class. Pell financial aid grant expenditures increased by $1.3 million. The student services and institutional support category increased 12%. Student services expenditures increased by 15% due to increases in several areas including student advising, student counseling and consultation, student information systems, undergraduate admissions, student health, student development, and co-curricular programs. Institutional support expenditures primarily increased in the areas of administrative information management/technology and institutional advancement. The research and public service category increased 9% due to increased expenditures relating to federal and state funded grants and contracts. The instruction and academic support category increased 8%, or $21.5 million, with the majority of the increase resulting from a $16.2 million increase in instruction expenditures. Areas with significant increases in instruction expenditures included interdisciplinary instruction, mathematics, english, biology, engineering, chemistry and biochemistry, and business. The $5.3 million increase in academic support included expenditures for activities specially designed to provide support services for instruction programs. These support services include library related expenditures, academic information technology support and academic administrative support. The auxiliary enterprises category increased 6%, due to increased expenditures by several auxiliary enterprises. The operation and maintenance of plant, and the other facility additions, debt service and other uses categories increased 4% and 2%, respectively. The Universitys objective is for sources to slightly exceed uses over a three to five year period on the basis that (1) current operating funding sources should over the long run be equal to or slightly exceed uses and (2) endowment funding sources should exceed uses in accordance with the Universitys objective of increasing, over a period of time, externally provided endowments. For any given year, total University funding sources will either exceed or be less than uses. For the five years ended June 30, 1998, total University funding sources exceeded uses by slightly less than 3%, with a significant portion of this increase occurring in the restricted endowment funds.
Financial Position
Fiscal Year 1998 1997
(Dollars in Millions) Assets (Resources available to provide future services or to pay obligations) Property, Buildings, and Equipment Other Assets (cash, investments, receivables, and deferred expenses) Total Assets Liabilities (Obligations requiring cash or other resources in the future) Bonds Payable and Other Long-term Obligations Other Liabilities (accounts payable, deferred revenue, and deposits) Total Liabilities Fund Balances (Resources available after obligations for providing of future services) Available for Current Operations: Restricted (must be spent as specified by external parties) Designated (may be spent as determined by University Administration) Restricted or Specified for Non-operating Purposes (bond reserves, student loans, endowments, and construction projects) Total Fund Balances before Net Investment in Plant Invested in Property, Buildings, and Equipment (property costs net of bonds payable and other long-term obligations) Total Fund Balances
Percentage Change
$ 1,215.5 259.1 $ 1,474.6
$ 1,196.2 224.5 $ 1,420.7
2 15 4
%
%
$
275.5 55.2 330.7
$
288.6 49.4 338.0
(5) % 12 (2) %
$
$
$
4.5 72.8
$
4.1 64.7
10 13
%
114.0
94.5
21
$
191.3
$
163.3
17
%
952.6 $ 1,143.9
919.4 $ 1,082.7
4 6 %
The 4% increase in total University assets resulted from a $19.3 million net increase in property, buildings, and equipment in conjunction with a $34.6 million increase in other assets. The $19.3 million net increase in property, buildings, and equipment was primarily due to a $16.8 million increase in buildings due to several renovation projects either completed or underway in fiscal 1998. The $34.6 million increase in other assets was primarily due to a $29.1 million increase in cash and investments. Endowment fund cash and investments increased $15.0 million primarily due to $12.1 million of net increase in fair value realized when endowment investments were converted from cost to fair value basis during fiscal 1998 in accordance with GASB Statement No. 31. Fair value typically is the quoted market price for investments. Included in the $12.1 million of net increase in fair value is $6.6 million relating to current year activity and $5.5 million relating to prior years. There was also a $7.5 million increase in cash and investments in the current operating funds. All other assets categories with the exception of donated land showed increases during fiscal 1998.
The 2% decrease in total liabilities was due to a $13.1 million decrease in bonds payable and other long-term obligations. The decrease in bonds payable and other long-term obligations was primarily due to principal being retired in fiscal 1998. Total fund balances increased 6% primarily due to the Universitys additional $33.2 million net investment in property, buildings, and equipment during fiscal 1998. This increase consisted of $31.9 million of equipment and library acquisitions funded by current operating funds. All fund groups had fund balance increases during fiscal 1998. Most notable was the $14.4 million increase in the endowment fund primarily due to the $12.1 million net increase in fair value mentioned above. Current operating funds increased $8.5 million primarily due to increases in the designated and auxiliary enterprises funds.
Arizona State University 5
ENROLLMENT
49,243 47,051 45,766 44,550 39,148 37,985 39,553 40,910 45,929 43,105
Full-Time Equivalent Students Total Headcount
Fall
1993
1994
1995
1996
1997
Degrees Conferred for Academic Year 1997-98
Bachelors Masters Doctors 7,261 2,359 418 10,038
Fall, 1997 Enrollment
Undergraduate Graduate In-State Out-of-State 37,132 12,111 36,427 12,816
6 Arizona State University
PERCENTAGE COMPOSITIONS
General Operating Fund
Revenue Sources
Other Sources 1%
Unrestricted Current Operating Funds
Revenue Sources
Gifts, Grants, and Contracts 4%
Tuition and Fees 28%
Tuition and Fees 31%
State Appropriations 71%
State Appropriations 48%
Auxiliary Enterprises and Other Sources 17%
Uses - By Expenditure Category
P a y r o l l Taxes and Fringe Benefits 11% Other Operating 19%
Uses - By Expenditure Category
P a y r o l l Taxes and Fringe Benefits 10% Other Operating 28%
Personal Services 63%
Personal Services 56%
Travel 1% Capital 6%
Travel 1% Capital 5%
Uses - By Program
Operation and M a i n t e n a n c e of Plant 9% Institutional Support 8% Student Services 6% Research and Public Service 4% Scholarships and Fellowships 5%
Uses - By Program
Operation and M a i n t e n a n c e of Plant 7% Institutional Support 10% Student Services 5% Research and Public Service 4% Scholarships and Fellowships 6% Auxiliary Enterprises 12%
Instruction and Academic Support 68%
Instruction and Academic Support 56%
Arizona State University 7
COMBINED SOURCES AND USES OF FUNDS
Sources
For the year ended June 30, 1998 (Dollars in Millions)
S t a t e Appropriations 40% $287.2 Represents State of Arizona legislative appropriations for current operations of the University and capital outlay of $8.1 million. Includes $11.7 million for summer sessions and $27.1 million of waivers, consisting of $25.1 million for scholarships and fellowships and $2.0 million for faculty and staff benefits.
Tuition and Fees 25%
177.2
Gifts, Grants, and Contracts 19% 137.0 Consists of research and educational service agreements, scholarships, endowments, and plant facility additions. Includes $92.6 million of Federal grants and contracts, $7.0 million of state grants and contracts, and $1.8 million of local government grants and contracts. Represents operations of essentially self-supporting activities such as bookstore, intercollegiate athletics, residence halls, and parking.
A u x i l i a r y Enterprises 10% 75.0
I n v e s t m e n t and Endowment Income 3%
22.5
O t h e r Sources 3%
Consists of earnings from short-term investments on collections in advance of expenditures, long-term investments of endowment and bond retirement funds, and changes in fair value of endowment investments. Fair value typically is the quoted market price for investments. Consists primarily of departmental sales and services.
20.1
$719.0
Note: The Combined Sources and Uses of Funds statement highlights major financial data. The explanations provided are not intended to be all-inclusive. This statement provides an overview of total University financial operations including the ASU Main, ASU West and ASU East Campuses. Restricted and unrestricted current operating and non-operating funds are included. Restricted funds have specific purposes stipulated by outside donors and agencies. Non-operating funds consist of the student loan, endowment, unexpended plant, and debt service funds. The investment in plant fund is not included, except for property gifts, since plant acquisitions are typically shown as a use of funds in either the current operating funds or unexpended plant fund at the time of acquisition. The non-operating funds generally are not available for use at the discretion of the University. Sources and uses are allocated and controlled by budgets.
8 Arizona State University
Uses
Instruction and Academic Support 43%
$297.3 Consists of (1) instruction expenditures totaling $217.8 million, which include credit and non-credit courses for academic, occupational, and vocational instruction for regular academic year and summer sessions, and continuing education, and (2) academic support expenditures totaling $79.5 million, which include libraries, academic information technology support and academic administration.
Research and Public Service 12% 85.4 Represents (1) activities specifically organized to produce research outcomes, whether funded by external agencies or separately budgeted by organizational units within the University, and (2) public service expenditures of $27.8 million for non-instructional services beneficial to individuals and groups external to the University, such as public broadcasting and public events.
Student Services and Institutional Support 12% 79.9 Consists of (1) student services expenditures totaling $28.7 million, which include admissions, registrar, student activities, counseling, career guidance, student aid administration, and student health services, and (2) institutional support expenditures totaling $51.2 million, which include executive management, financial operations, human resources, public safety, community relations, administrative information technology support, and alumni relations. 5% 37.4 Represents expenditures for the operation and maintenance of plant, exclusive of amounts charged to auxiliary enterprises, including services related to facilities and grounds, and utility costs. 63.0 Includes grants paid from the restricted fund, and tuition and fee waivers awarded to students enrolled in formal course work, with the students not being required to perform personal services or repay the awards. 62.7 Consists of departments managed as essentially self-supporting activities that furnish services to students and staff for a fee directly related to, but not necessarily equal to, the cost of the service. 46.9 Represents (1) additions to physical facilities of $17.3 million funded from the unexpended plant fund and $1.0 million of property gifts (excludes $31.9 million of property additions charged to current funds, since such uses have already been reflected in the above programs), and (2) debt servicing payments, totaling $28.6 million, consisting of $15.4 million of interest payments and $13.2 million of principal retired.
Operation and Maintenance of Plant
Scholarships and Fellowships 9%
A u x i l i a r y Enterprises 9%
Facility Additions and Debt Servicing 7%
O t h e r Uses 3% 18.4 Consists primarily of indirect cost recovered of $14.7 million.
Net Increase in Fund Balances
$691.0 28.0 $719.0 Arizona State University 9
BALANCE SHEET
(Dollars in Thousands) June 30,1998 (with comparative totals for 1997)
CURRENT OPERATING FUNDS Unrestricted Funds General Auxiliary Operating Designated Enterprises R e s t r i c t e d Fund Fund Fund Fund
To t al Current Operating Funds
Assets Cash and investments - Note A Accounts receivable, less allowance of $1,950 in 1998 and $1,573 in 1997 Loans receivable, less allowance of $2,095 in 1998 and $1,999 in 1997 - Note B Inventories Deferred expenses and deposits Due from other funds Donated land Property, buildings, and equipment Note C $ 11,144 164 $ 55,573 3,301 $ 11,618 6,002 $ 269 12,678 $ 78,604 22,145
3,280 4,654
5,576 274
5,576 3,554 4,654
$
11,308
$
66,808
$
23,470
$
12,947
$ 114,533
Liabilities and Fund Balances Liabilities Accounts payable and accrued expenses Deferred revenue Employee retirement and insurance deposits Other deposits Due to other funds Bonds payable - Note D Lease-purchases and other long-term obligations - Note E Fund Balances
$
3,199 2,539
$
1,293 12,390
$
2,763 5,678
$
880 2,957
$
8,135 23,564
55
870
4,654
925 4,654
$ $
5,738 5,570 11,308
$ $
13,738 53,070 66,808
$ $
9,311 14,159 23,470
$ $
8,491 4,456 12,947
$
37,278 77,255 $ 114,533
Fund Balances Consist of Restricted U.S. Government grants refundable Endowments General Designated Outstanding purchase orders and other commitments Summer sessions Quasi-endowments General Net investment in plant
$
4,456
$
4,456
$
5,560
$
3,048 50,022 $ $ 14,159 14,159 $ 4,456 $
5,560 3,048 64,191 77,255
10 $ 5,570 $
53,070
See Summary of Significant Accounting Policies and Notes to Financial Statements.
10 Arizona State University
NON-OPERATING FUNDS Student Loan Fund Endowment Fund Combined Plant Fund Agency Fund
TOTA L ALL FUNDS Memorandum Only 1998 1997
$
818 15 12,327
$
51,922 238
$
68,989 257
$
7,361 1,470
$
207,694 24,125 12,327 5,576 3,566 4,654 1,119
$
178,592 20,622 12,289 5,471 3,282 3,227 1,119
12 1,119 $ 13,160 $ 53,279 1,215,509 $ 1,284,755 $ 8,843
1,215,509 $ 1,474,570
1,196,155 $ 1,420,757
$
16
$
52
$
9,050
$
989 55 5,309 2,490
$
18,242 23,619 5,309 3,415 4,654 223,078
$
17,241 21,220 4,553 3,203 3,227 232,344
223,078 52,334 284,462 1,000,293 $ 1,284,755 $
16 13,144 $ 13,160
$
$ $
52 53,227 53,279
$ $
8,843 8,843
$
52,334 330,651 1,143,919 $ 1,474,570
$
56,238 338,026 1,082,731 $ 1,420,757
$ 10,410 2,620
$
48,958
$ $ 13,526
10,410 48,958 20,602
$
10,453 37,896 19,497
114 $ 13,144 $
4,269 53,227
34,175 952,592 $ 1,000,293
5,560 3,048 4,269 98,480 952,592 $ 1,143,919
3,928 3,203 929 87,382 919,443 $ 1,082,731
Arizona State University 11
STATEMENT OF CHANGES IN FUND BALANCES
CURRENT OPERATING FUNDS U n r e s t r i c t e d Funds Auxiliary General Enterprises Operating Designated Restricted Fund Fund Fund Fund
(Dollars in Thousands) For the year ended June 30, 1998 (with comparative totals for 1997) Revenues and Other Additions Unrestricted current revenues Restricted Governmental grants and contracts Private gifts, grants, and contracts State appropriations Financial aid trust fund Conveyance of property - Note C Investment and endowment income Interest on student loans Expended for plant facilities including $31,887 charged to current funds expenditures in 1998 and $35,618 in 1997 Retirement of indebtedness including $1,060 charged to current funds expenditures in 1998 and $725 in 1997 Other additions Total revenues and other additions
To ta l Current Operating Funds
$ 392,880
$ 103,712
$ 81,097 $ 87,791 25,405 916 1,156
$ 577,689 87,791 25,405 916 1,156
$ 392,880
$ 103,712
$ 81,097
$ 115,268
$ 692,957
Expenditures and Other Deductions Educational and general expenditures Auxiliary enterprises expenditures Indirect costs recovered Cancellation of loans and provision for bad debts Administrative and collection costs Expended for plant facilities Interest on indebtedness Retirement of plant facilities Retirement of indebtedness Other deductions Total expenditures and other deductions $ 386,330 $ 75,062 $ 62,693 $ 101,661 14,736 $ 563,053 62,693 14,736
$ 386,330
$ 75,062
$ 62,693
242 $ 116,639
242 $ 640,724
Transfers Among Funds - Additions (Deductions) Mandatory Bond indenture requirements Other mandatory transfers Voluntary, net Total transfers Net Increase for the Year Fund Balances, Beginning of Year Fund Balances, End of Year $ $ (15,705) (2,154) (6,537) $ (24,396) $ 4,254 48,816 $ 53,070 $ (6,657) (103) (9,414) $ (16,174) $ 2,230 11,929 $ 14,159 $ $ (22,362) (5,633) (15,726) $ (43,721) $ 8,512 68,743 $ 77,255
$ $ $
(4,915) (4,915) 1,635 3,935 5,570
$ $ $
1,539 225 1,764 393 4,063 4,456
See Summary of Significant Accounting Policies and Notes to Financial Statements. 12 Arizona State University
NON-OPERATING FUNDS Student Loan Fund Endowment Fund Unexpended Plant Fund
TOTA L ALL FUNDS Combined Plant Funds Memorandum Only 1998 1997
Plant Funds Debt Investment Service in Plant Fund Fund
$ $ 24 $ 61 749 8,087 $ 61 1,722 8,087
577,689 87,876 27,530 8,087 1,832 15,246 342
$
533,615 78,651 27,434 3,964 1,646 56,360 8,164 383
$
403 916
$
973
46 342
13,083
$
961
961
49,167
49,167
49,167
51,360
$
69 481
$ 14,402
$
309 9,206
$
58 1,019
14,259 2,007 $ 66,406
$
14,259 2,374 76,631
$
14,259 2,443 784,471
$
14,302 219 776,098
$
563,053 62,693 14,736 354 118 17,280 15,444 31,250 13,199 5,156 723,283
$
516,125 59,352 13,799 376 209 15,742 16,100 22,407 13,577 3,289 660,976
$
354 118
$ 17,280
$ 15,444 13,199 59 $ 28,702
$ $ 31,250 2,007 $ 33,257
$
10 482
2,838 $ 20,118
$
17,280 15,444 31,250 13,199 4,904 82,077
$
$
$ $ $
8 8 7 13,137 $ 14,402 38,825 $ 53,227
$
85 15,048 $ 15,133 4,221 29,301
$ 22,362 5,540 678 $ 28,580 $ 897 13,282 $ 14,179 $ 33,149 919,443 $ 952,592
$
$ $
22,362 5,625 15,726 43,713 38,267 962,026 $ 61,188 1,082,731 $ 1,143,919 $ 115,122 967,609 $ 1,082,731
$
$ 13,144
$ 33,522
$ 1,000,293
STATEMENT OF CURRENT OPERATING FUNDS R E V E N U E S , EXPENDITURES, AND OTHER CHANGES
(Dollars in Thousands) For the year ended June 30,1998 (with comparative totals for 1997) U n r e s t r i c t e d Funds Auxiliary General Designated Enterprises Operating Fund Fund Fund Revenues State appropriations Tuition and fees Collected Value of waivers Governmental grants and contracts Private gifts, grants, and contracts Financial aid trust fund Investment and endowment income Sales and services of auxiliary enterprises Internal services, less related expenditures of $32,487 in 1998 and $34,466 in 1997 Other sources Total revenues $ 279,145 92,260 19,216 $ 55,771 7,862 13,576 5,491 7,305 $ 2,081 $ 75,570 24,204 869 1,018 $ 279,145 150,112 27,078 89,146 32,188 869 8,327 75,022 $ 256,071 138,382 24,561 79,586 30,480 697 8,052 70,955
Restricted Fund
To t a l Current O p e r a t i n g Funds Memorandum Only 1998 1997
2,493 4 75,022
1,497 2,259 $ 392,880 13,707 $103,712 $ 81,097 $ 101,661
1,497 15,966 $ 679,350
1,571 16,438 $ 626,793
E x p e n d i t u r e s and Mandatory Transfers Educational and general Instruction Research Public service Academic support Student services Institutional support Operation and maintenance of plant Scholarships and fellowships Educational and general expenditures Mandatory transfers Total educational and general Auxiliary enterprises Expenditures Mandatory transfers Total auxiliary enterprises Total expenditures and mandatory transfers Other Transfers and Additions (Deductions) Restricted receipts under transfers to revenues Voluntary transfers, net Other Net Increase in Fund Balances $ 1,635 $ $ (6,537) $ (9,414) (1,129) 225 (242) 393 $ (1,129) (15,726) (242) 8,512 $ (1,614) (12,158) (137) 9,630 $ 199,924 11,093 2,367 64,190 21,477 32,713 36,581 17,985 $ 386,330 4,915 $ 391,245 $ 13,759 7,324 2,090 14,662 4,762 18,149 326 13,990 $ 75,062 17,859 $ 92,921 $ 4,139 39,197 23,343 648 2,459 312 512 31,051 $ 101,661 (1,539) $ 100,122 $ 217,822 57,614 27,800 79,500 28,698 51,174 37,419 63,026 $ 563,053 21,235 $ 584,288 $ 201,619 50,673 27,416 74,214 24,977 46,613 35,883 54,730 $ 516,125 21,167 $ 537,292
$ 62,693 6,760 $ 69,453
$ 62,693 6,760 $ 69,453
$ 59,352 6,610 $ 65,962
$ 391,245
$ 92,921
$ 69,453
$ 100,122
$ 653,741
$ 603,254
$
4,254
$
2,230
$
$
$
See Summary of Significant Accounting Policies and Notes to Financial Statements.
14 Arizona State University
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
June 30, 1998 Basis of Accounting For financial reporting purposes, the University includes those funds that are directly controlled by the University. Control by the University is determined on the basis of financial accountability. Fiscal responsibility for the University remains with the State of Arizona; therefore the University is considered a part of the reporting entity for the States financial reporting purposes. The financial statements do not include the financially interrelated organizations described in Note F. The financial statements have been prepared on the accrual basis of accounting in conformity with generally accepted accounting principles applicable to governmental colleges and universities as set forth in the AICPA College Guide model as defined in Governmental Accounting Standards Board Statement No. 15. The Statement of Current Operating Funds Revenues, Expenditures, and Other Changes is a statement of financial activities of operating funds related to the current reporting period. It does not purport to present the results of operations or the net income or loss for the period as would a statement of revenues and expenses. Investments in securities are stated at fair value at June 30, 1998. Fair value typically is the quoted market price for investments. Various methods are used by Auxiliary Enterprises units to value their inventory. The ASU Bookstore inventory comprises approximately 69% of the total inventory reported on the balance sheet and is valued using the retail method. Property, buildings, and equipment are stated at cost at the date of acquisition or fair market value if donated. The University does not depreciate buildings and equipment. To the extent that current operating funds are used to finance plant assets, the amounts so provided are accounted for as (1) expenditures, in the case of normal acquisition and/or replacement of movable equipment and library books; (2) mandatory transfers, in the case of required provisions for debt amortization and interest, and equipment renewal and replacement; and (3) voluntary transfers in all other cases. Summer sessions revenues and expenditures are reported within the fiscal year in which the total summer sessions program is predominantly conducted. Accordingly, only the revenues and expenditures of the 1997 summer sessions are included in the Statement of Current Operating Funds Revenues, Expenditures, and Other Changes. Revenues and expenditures as of June 30, 1998 for the 1998 summer sessions are reported as deferred revenues and expenses on the Balance Sheet. Tuition and fees revenues (net of refunds) include $25.1 million of waivers charged to Scholarships and Fellowships and $2.0 million of waivers for faculty and staff benefits. The financial information shown for fiscal 1997 in the accompanying financial statements is included as a basis for providing comparison with fiscal 1998 and presents summarized totals only. Fund Accounting The accounts are maintained in accordance with the principles of fund accounting. These principles require that resources be classified for accounting and reporting purposes into funds in accordance with the activities or objectives specified for the resources. Accounts are separately maintained for each fund; however, in the accompanying financial statements, funds that have similar characteristics have been combined into fund groups. Description of Funds Current operating funds are used primarily to account for transactions which are expended in performing the primary and support missions of the University: instruction, research, public service, academic support, student services, institutional support, operation and maintenance of plant, scholarships and fellowships, and auxiliary enterprises. Current Operating Funds consist of the following: 1. The General Operating Fund which is used to account for transactions related to the Universitys State-appropriated budgets as approved by the Arizona State Legislature and Arizona Board of Regents. 2. The Designated Fund which is used primarily to account for transactions related to academic year tuition and fees retained by the University, the summer sessions program, the recovery of indirect costs of sponsored research programs, the recovery of administrative costs of student aid, departmental sales and services, and the use of unrestricted gifts. The resources in this fund have been designated for specific purposes by the University. 3. The Auxiliary Enterprises Fund which is used to account for transactions of substantially self-supporting activities that primarily provide services for students, faculty, and staff. Auxiliary enterprises include, but are not limited to, residence halls, food services, bookstore, and intercollegiate athletics. 4. The Restricted Fund which is used to account for current funds expended for operating purposes but restricted by donors or other outside agencies as to the specific purpose for which they may be expended. Revenues of the Restricted Fund are reported in the Statement of Current Operating Funds Revenues, Expenditures, and Other Changes only to the extent expended for current operating purposes. Amounts received in excess of expenditures are included as additions to fund balances during the year. Non-Operating Funds consist of the following: 1. The Student Loan Fund, financed primarily by the Federal government, which is used to account for loans to students. Interest is recorded on the accrual basis. Provisions of the Federal loan program stipulate that: - The University match one-third of Federal contributions; and - A portion of the loan principal and interest (ranging from 15% to 30% per year) can be cancelled and absorbed by the Federal government, if the recipient completes certain employment requirements. 2. The Endowment Fund which is used to account for permanent endowments, term endowments, and quasi-endowments. Permanent endowment funds are subject to the restrictions of donor gift instruments requiring that the principal be invested in perpetuity and that only the income be used. Term endowment funds provide that, upon the passage of a stated period of time or the occurrence of a particular event, all or part of the principal may be expended. Quasi-endowment funds have been established by the University for the same purposes as endowment funds; any portion of such funds may be expended. Restricted quasi-endowment funds must be expended according to donor specified purposes; unrestricted quasi-endowment funds, however, may be expended as determined by the University. 3. The Plant Funds which are used to account for the transactions relating to investment in University properties. They include the (1) Unexpended Plant Fund, (2) Debt Service Fund, and (3) Investment in Plant Fund. The Unexpended Plant Fund represents amounts which have been appropriated or designated for purchases of land, improvements, buildings, and equipment. The Debt Service Fund represents funds set aside to provide for payments of indebtedness primarily pursuant to terms of bond and trust indentures. The Investment in Plant Fund represents the total of property, buildings, equipment, and related liabilities. 4. The Agency Fund which is used to account for assets held by the University as custodian or fiscal agent for others; therefore, the transactions of this fund do not affect the Statement of Changes in Fund Balances.
Arizona State University 15
June 30, 1998
NOTES TO FINANCIAL STATEMENTS
N o t e A - Cash and Investments Under Arizona State law and Board of Regents policies, the University may invest its operating funds only in the State of Arizona Local Government Investment Pool, collateralized time certificates of deposit or repurchase agreements, U.S. Treasury securities, or other Federal agency securities. Gift and endowment funds may be invested under the direction of an investment committee in such a manner as to obtain the most favorable rate of return and income stability commensurate with safety of principal. Bond trustee funds are invested by the bond trustee in accordance with the financing indenture. A summary of the components of cashdand investments at June 30, 1998 by management area follows (Dollars in Thousands): Bon trustee funds: Fair Value Money market portfolios and cash............................................ $ Guaranteed Investment Contracts............................................ U.S. Treasury and other Federal agency securities................................................................. Endowment funds: The Vanguard Group................................................................. Metropolitan Life Insurance Corporation................................... The Common Fund..................................................................... Arizona Universities financial aid trust fund endowment.......................................................... Sun Angel Foundation............................................................... Pooled cash and short-term investments: State of Arizona Local Government Investment Pool, net of bank balance..................................................... U.S. Treasury and other Federal agency securities................................................................. $ 21,346 5,893 2,572 28,700 6,601 6,311 9,687 674 124,887 1,023 207,694
Bond trustee funds. The bond trustee funds are managed by Bank of New York, Bank One, and US Bank, and generally consist of U.S Government securities (Treasury securities or other Federal agency securities), cash, certificates of deposit, and Federal money market accounts. Each banks trust department purchases U.S. Government securities for the University. U.S. Government securities are held by either the Federal Reserve Bank or the Depository Trust Company (DTC) in custodial accounts for Bank of New York, Bank One, and US Bank, in computerized book-entry systems in which changes of financial institutions interests are recorded. In turn, changes in the Universitys ownership interests are recorded in Bank of New Yorks, Bank Ones, and US Banks records. Generally, funds not directly invested in U.S. Government securities are invested in pooled Federal money market accounts in which securities are purchased and held by the trustee. Occasionally, small cash balances are maintained, or certificates of deposit are purchased by the banks trust department. For cash and certificates of deposit, book-entry pledges of Federal government securities are obtained as collateral and held by the trust department on a pooled basis. In conjunction with the ASU West lease-purchase financing, there is a $5,447,000 reserve fund maintained in a guaranteed investment contract (GIC). This GIC is from a major insurance firm and if the bond rating of this firm should fall to A- or below, the firm must provide U.S. Treasury securities as collateral for the GIC to the Universitys bond trustee. Endowment funds. The Vanguard Group investments are in four index equity funds: Institutional (Standard and Poors 500) Index Fund, Extended Market Portfolio, Small Capitalization Stock Portfolio, and Total International Portfolio. The Vanguard Group is a mutual fund company offering over 90 portfolios. The Metropolitan Life investments are in the MetLife South Station Fund which invests in publicly traded fixed income securities. The Common Fund endowment investment are in that organizations Multi-Strategy Bond Fund. The Common Fund is a unique, nonprofit membership organization which provides investment management services exclusively for educational institutions and has approximately 900 member colleges, universities, and independent schools participating in various pooled equity and debt funds. The financial aid trust fund is funded from student fees and by the Arizona State Legislature. The fund is managed in a pool by the University of Arizona along with the financial aid trust funds for the other two state universities. The Sun Angel Foundation manages a portion of ASUs endowment funds in equity and bond securities pursuant to a trust agreement. Pooled cash and short-term investments. Pooled cash and short-term investments at June 30, 1998 were principally with the State of Arizona Local Government Investment Pool. The Universitys investment in the pool represents shares in that pools portfolio. The shares are not identified with specific investments and are not subject to custodial credit risk. The University sometimes also has investments in collateralized repurchase agreements, U.S. Treasury securities, and Federal agency securities. Repurchase agreements are with various major financial institutions under master agreements with the University. For repurchase agreements with a duration of over two weeks, the University has underlying securities transferred to Bank of Americas Treasury Management Department. U.S. Treasury and Federal agency securities are held in the banks custodial account with the Federal Reserve Bank or DTC and in the Universitys name in the banks records. These securities are either purchased from a broker/dealer or a financial institution. The Universitys bank and collected (portion of bank balance available for investment) balances at the bank at June 30, 1998 were $5,264,000 and $375,000 respectively, and the carrying value of deposits on the Universitys accounting system was a deficit $1,933,000. The carrying value of deposits balance has been netted against the State of Arizona Local Government Investment Pool in the above table. The cash deficit balance on the accounting system occurs because cash is not transferred from investments to the bank account until outstanding checks are expected to be presented to the bank for payment. The Universitys deposits are fully collateralized with governmental securities (U.S. or investment grade municipals) held by either the banks agent or the banks agents custodial account with either the Federal Reserve or the DTC in the Universitys name. Effective for the year ended June 30, 1998, the University adopted the provisions of the Governmental Accounting Standards Board Statement No. 31, which became effective for fiscal years beginning after June 15, 1997. This Statement requires that investments be reported at fair value rather than at cost. Fair value typically is the quoted market price for investments. Statement No. 31 also requires that changes during the year in fair value be part of the reported investment income. Therefore, included in the Universitys endowment fund investment income for the year ended June 30, 1998 is $5.5 million of net increase in fair value related to prior years and $6.6 million of net increase in fair value that occurred during the year. The University has not restated beginning of year fund balances for the effect of this accounting change because it does not have a significant effect on the accompanying financial statements taken as a whole. Note B - Loans Receivable Loans receivable from students bear interest primarily at 3% to 5% and are generally repayable in installments to the University over a five-to-ten year period commencing six to nine months from date of separation from the University. The University provides an allowance for estimated uncollectible amounts and related collection costs. 16 Arizona State University
Note C - Property, Buildings, and Equipment Property, buildings, and equipment at June 30, 1998 consist of the following (Dollars in Thousands): Land and Improvements................................................................................................ Buildings........................................................................................................................ Equipment...................................................................................................................... Library books, media, and works of art........................................................................ $ 123,249 720,062 239,767 132,431 $ 1,215,509
The Unexpended Plant Fund balance is committed for projects planned and under construction and for future building repairs and equipment replacements. Future commitments approximate $33.5 million at June 30, 1998. In October 1996, the Federal Government conveyed to the University a portion of the former Williams Air Force Base which is used by the University as the ASU East Campus. The property transfer is conditional upon the use of the property being for educational purposes in accordance with the terms of the deed. The appraised fair value of the property conveyed was $56.4 million and consisted of 61 multi-purpose use buildings and 177 single family residences valued at $45.3 million, site improvements valued at $3.5 million, and 279.1 acres of land valued at $7.6 million. The University recorded on its records this conveyed property at the time of title transfer at its appraised value. This was the initial conveyance in what the University anticipates to be a two-phase transfer of title to the property it occupies as the ASU East Campus. The appraised fair value of the property yet to be conveyed is $33.3 million, and includes 4 multi-purpose use buildings, 390 single family residences and 312.9 acres of land. The University will record these remaining assets at the time they are conveyed by the Federal Government. As of September 4, 1998, only the initial conveyance totaling $56.4 million had occurred. Note D - Bonds Payable Bonds payable at June 30, 1998 consist of the following (Dollars in Thousands): Average Interest Rates 2.75% to 5.50% 7.09% 7.13% 6.25% 5.88% 4.93% Final Maturities (Calendar Year) 2000-2006 2004 2005 2015 2019 2008 Outstanding Principal $ 2,823 11,365 7,900 29,410 148,440 23,140 $ 223,078
Housing revenue bonds 1989 System revenue bonds 1991 System revenue bonds 1992 System revenue refunding bonds 1992A System revenue refunding bonds 1993 System revenue refunding bonds
In prior years, certain system revenue bonds of the University were also in substance defeased through advance refundings by depositing sufficient U.S. Government securities to pay all future debt service in an irrevocable trust. Accordingly, the liabilities for these defeased bonds are not included in the Universitys financial statements. The principal amount of all refunded bonds outstanding at June 30, 1998 was $76,950,000. The housing revenue bonds are payable from housing revenues as defined in the bond indentures. The 1992, 1992A, and 1993 Syste m revenue refunding bonds, and the outstanding 1989 and 1991 System revenue bonds are payable from Main Campus tuition and fees, certain auxiliary enterprises revenues, and certain other revenues as defined in the bond indentures. Securities and cash restricted for bond retirement funds and maintenance and replacement reserves held by trustees at June 30, 1998 totaled $17,207,000. A schedule of future debt service funding commitments, including interest, for bonds outstanding follows (Dollars in Thousands): Housing Revenue Bonds $ 550 557 490 492 383 671 $ 3,143 System Revenue Bonds $ 21,884 20,761 20,733 20,703 20,795 228,695 $ 333,571
Fiscal 1999 2000 2001 2002 2003 Thereafter
$
Total 22,434 21,318 21,223 21,195 21,178 229,366 $ 336,714
Note E - Lease-Purchases and Other Long-Term Obligations Lease-purchases and other long-term obligations at June 30, 1998 consisted of the following (Dollars in Thousands): Average Interest Rates 5.18% 7.64% 6.89% 4.88% to 12.01% Final Maturities (Calendar Year) 2009 1998 2010 2003 $ Outstanding Principal $ 44,270 2,270 3,710 2,084 52,334
Lease-Purchase Certificates of Participation: 1993 ASU West Refunding 1989 ASU West Construction 1991 Towers Project (through ASU Foundation) Other Lease-Purchases and Installment Purchases
Arizona State University 17
NOTES TO FINANCIAL STATEMENTS
In prior years, certain certificates of participation of the University were in substance defeased through advance refundings by depositing sufficient U.S. Government securities to pay all future debt service in an irrevocable trust. Accordingly, the liabilities for these defeased certificates of participation are not included in the Universitys financial statements. The principal amount of all refunded certificates of participation outstanding at June 30, 1998 was $39,685,000. Securities and cash restricted for non-bond retirement funds and maintenance and replacement reserves held by trustees at June 30, 1998 totaled $12,589,000. A schedule of funding commitments for lease-purchases and other long-term obligations follows (Dollars in Thousands): Certificates of Participation ASU West To w e r s Refunding Project $ 5,278 $ 444 5,250 441 5,244 443 5,243 442 5,242 446 31,450 3,102 $ 57,707 $ 5,318
Fiscal 1999 2000 2001 2002 2003 Thereafter
Other $ 409 365 350 328 263 706 $ 2,421
Total $ 6,131 6,056 6,037 6,013 5,951 35,258 $ 65,446
Note F - Financially Interrelated Organizations Not included in the financial statements of the University are six financially interrelated organizations that are nonprofit corporations controlled by separate Boards of Directors whose goals are to support Arizona State University. Financial statements of these organizations are audited by independent auditors. Four of these financially interrelated organizations the Arizona State University Alumni Association, Arizona State University Foundation, Sun Angel Foundation, and Sun Angel Endowment receive funds primarily through donations and dues, and contribute funds to the University for support of various programs. A fifth financially interrelated organization, Price-Elliott Research Park, Inc. (Park), is developing a research park to promote and support research activities, in coordination with the University. In developing the research park, the Park has issued bonds guaranteed by the University. As of June 30, 1998, the Park had $18,320,000 of revenue bonds outstanding at an average interest rate of 5.26%. The debt service on the bonds is secured by a subordinated lien on ASU Main Campus revenues. Park revenues are not pledged in order to provide development flex ibility to the Park. During fiscal year 1998, the University sold a right of way to the Arizona Department of Transportation for the construction of a freeway, consisting of 9.3 of the 324.0 acres comprising the Park. Pursuant to the lease agreement between the Park and University, $1,963,000 representing the value of the land was distributed to the University. The University, pursuant to legal authority previously granted to it by a debt service assurance agreement for payment security on the Parks refunding bonds, deposited the $1,963,000 and accumulated interest of $44,000 in an irrevocable trust with an escrow agent to fund selected future debt service payments on the bonds. The funds were invested in U.S. Government Securities and have defeased $2,055,000 of outstanding bonds, with the liability for this amount of bonds removed from the Parks financial statements. Annual debt service on the Park bonds will be $997,000 in fiscal year 1999 and varies from a low of $898,000 in fiscal 2004 to a high of $1,698,000 in fiscal 2006. The University is obligated to pay the annual debt service, if not paid by the Park, under a debt service assurance agreement. During fiscal 1998, the University provided the Park net cash transfers totaling $543,000. The cash transfers constitute operating cash advances and are repayable with interest to the University (1) upon the Parks total gross receipts for a fiscal year exceeding its total disbursements for that fiscal year and (2) before any Park surpluses are transferred to the Arizona State University Foundation. Total cash advances repayable to the University at June 30, 1998, including the accrued interest, totaled $8,473,000. Due to the Parks repayment to the University being dependent upon successful future operations, the amount owed by the Park is not recorded as an asset on the Universitys balance sheet. A sixth financially interrelated organization, the Collegiate Golf Foundation, operates a University owned golf course. Assets, net assets, and revenues for these organizations for the most recent fiscal years for which audits have been completed aggregated $147.6 million, $107.4 million, and $70.0 million, respectively, with substantially all of the net assets being donor restricted or endowment funds. The Sun Devil Club, a financially interrelated organization reported in prior years, has discontinued operations. Effective July 1, 1997, the gift raising, membership support, and other related responsibilities previously performed by the Sun Devil Club have been assumed by the Sun Angel Foundation. Note G - General Operating Fund Beginning in fiscal 1995, the University has received a separate appropriation from the Arizona State Legislature for the ASU East Campus. This appropriation along with the separate appropriation for the ASU West Campus (since 1985) are combined with the ASU Main Campus appropriation to constitute the General Operating Fund. Separation of the General Operating Fund between campuses for fiscal 1998 is as follows (Dollars in Thousands): Main West East Total State appropriations................................. $ 236,145 $ 35,946 $ 7,054 $ 279,145 Tuition, fees and other revenues............. 105,268 6,521 1,946 113,735 Total Revenues..................... $ 341,413 $ 42,467 $ 9,000 $ 392,880 Expenditures............................................ 339,781 37,570 8,979 386,330 Mandatory transfers................................ 4,915 4,915 Net Increase (Decrease) for the Year $ 1,632 $ (18) $ 21 $ 1,635 Fund Balances, Beginning of Year........... 2,921 991 23 3,935 Fund Balances, End of Year.................... $ 4,553 $ 973 $ 44 $ 5,570 Fund Balances consist of: Outstanding purchase orders and other commitments............................ $ General................................................. $ 18 Arizona State University
4,545 8 4,553
$ $
972 1 973
$ $
43 1 44
$ $
5,560 10 5,570
Note H - Retirement Plans The University participates in one cost-sharing multiple-employer defined benefit pension plan and four defined contribution pension plans. The following disclosures are required by GASB Statement No. 27, Accounting for Pensions by State and Local Governmental Employers. Defined Benefit Plan Plan Description. The Arizona State Retirement System (ASRS) administers a cost-sharing multiple-employer defined benefit pension plan that covers eligible employees of the University. Benefits are established by state statute and provide retirement, death, long-term disability, survivor, and health insurance premium benefits. The ASRS is governed by the Arizona State Retirement System Board according to the provisions of Arizona Revised Statutes (A.R.S.) Title 38, Chapter 5, Article 2. The ASRS issues a publicly available financial report that includes its financial statements and required supplementary information. That report may be obtained by writing to the ASRS, 3300 North Central Avenue, P.O. Box 33910, Phoenix, Arizona 85067-3910 or by calling (602) 240-2000 or (800) 621-3778. Funding Policy. For the year ended June 30, 1998, active ASRS members and the University were each required by statute to contribute at the actuarially determined rate of 3.54% (3.05% retirement and 0.49% long-term disability) of the employees annual covered payroll. The Arizona State Legislature establishes and may amend active plan members and the Universitys contribution rates. Both the University and the covered employees made the required contributions for the years ended June 30, 1998, 1997 and 1996 as follows (Dollars in Thousands):
Contributions Rates (Each) 1998 1997 1996 Defined Contribution Plans 3.54% 3.69% 3.85%
University Contributions $ 4,773 4,439 4,532
Employee Contributions $ 4,773 4,439 4,532
Total Contributions $ 9,546 8,878 9,064
Plan Description. In accordance with A.R.S. 15-1628, University faculty, academic professionals, service professionals and administrative staff have the option to participate in defined contribution pension plans. These plans are administered by independent insurance and annuity companies approved by the Arizona Board of Regents. For the year ended June 30, 1998, plans offered by the Teachers Insurance Annuity Association/College Retirement Equities Fund (TIAA/CREF), Variable Annuity Life Insurance Company (VALIC), Fidelity Investments Tax-Exempt Services Company (Fidelity), and Aetna Life Insurance and Annuity Company (Aetna) were approved by the Arizona Board of Regents. Benefits under these plans depend solely on the contributed amounts and the returns earned on the investment of those contributions. Contributions made by employees vest immediately and University contributions vest no later than after five years of full-time employment. Employee and University contributions and associated returns earned on investments may be withdrawn starting upon termination of employment, death, or retirement. The distribution of employee contributions and associated investment earnings are made in accordance with the employees contract with the applicable insurance and annuity company. University contributions and associated investment earnings must be distributed to the employee in the form of an annuity paid over the employees life. Funding Policy. The Arizona State Legislature establishes and may amend active plan members and the Universitys contribution rates. For the year ended June 30, 1998, plan members and the University were each required by statute to contribute an amount equal to 7.00% of an employees compensation. Contributions to these plans for year ended June 30, 1998, were as follows (Dollars in Thousands): Contributions Rates (Each) TIAA/CREF VALIC Fidelity Aetna 7% 7% 7% 7% University Contributions $ 7,531 1,215 529 210 Employee Contributions $ 7,531 1,215 529 210 Total Contributions $ 15,062 2,430 1,058 420
Note I - Accrued Vacation Pay The University has not made accruals for vacation time earned, but not taken, as of fiscal year end. If the accruals for vacation pay were made, including the related employers FICA taxes, the General Operating, Designated, Auxiliary Enterprises, and Restricted Funds liabilities would be increased by approximately $7,431,000, $970,000, $1,075,000 and $762,000, respectively. University management believes that this omission does not have a significant effect on the accompanying financial statements taken as a whole. The General Operating Fund liability would be funded by the subsequent year s appropriations from the State Legislature. Note J - Other Matters Pursuant to A.R.S. 41-621, the University participates in a self-insurance program administered by the State of Arizona, Department of Administration, Risk Management Section. The States Risk Management Program covers the University, subject to certain deductibles, for risks of loss related to such situations as theft, damage and destruction of property, buildings, and equipment; errors and omissions; injuries to employees; natural disasters; and liability for acts or omissions of any nature while acting in authorized governmental or proprietary capacities and in the course and scope of employment or authorization, except as prescribed in A.R.S. 41-621. Loss risks not covered by the Risk Management Section and where the University has no insurance coverage are losses arising from contractual breaches and losses that arise out of and are directly attributable to an act or omission determined by a court to be a felony. In accordance with the disclosure requirements of Governmental Accounting Standards Board Statement No. 10, we note that judgments and claims not covered by the Risk Management Section during the three years ended June 30, 1998 have not been material to the Universitys financial statements taken as a whole. Federal grants provided to the University and accounted for in the Restricted Fund and in the Student Loan Fund are subject to review and audit by Federal agencies. In the opinion of the University, any adjustments or repayments which may be required would not be material to the overall financial condition of the University. Arizona State University 19
INDEPENDENT AUDITORS REPORT
S TAT E OF ARIZONA
D O U G L A S R . N O R T O N , C PA AUDITOR GENERAL
OFFICE
OF THE
A U D I T O R GENERAL
Independent Auditors' Report
DEBRA K. DAVENPORT, CPA DEPUTY AUDITOR GENERAL
M e m b e rs of the Arizona State Legislature The Arizona Board of Regents
We
have
audited the the
the
accompanying statements and these in we other of
balance of the changes
sheet in for
of
Arizona year
State
University current These
as
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1998, ments
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well
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believe the fund for
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opinion. in all 1998, material and the and
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respects, changes other
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Arizona in
University with
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revenues,
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conformity
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accounting
principles.
Douglas R. Norton Auditor General
September 4, 1998
20 Arizona State University

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Arizona State Library, Archives and Public Records--Law and Research Library.

Full Text

FINANCIAL REPORT 1998
Pictured on the cover is the Student Services Building located on the ASU Main Campus in Tempe. The Student Services Building houses many of the nonacademic offices which assist students on a daily basis. Among the offices located there are the offices of student financial assistance, registrar, student employment, tuition payment, cashiering services, undergraduate admissions, residency classification, career services, and counseling and consultation. ASUs student body represents all 50 states as well as more than 115 different nations. ASU students include Truman Scholars, Woodrow Wilson Scholars, Marshall Scholars, Goldwater Scholars, a Rhodes Scholar, Fulbright Fellows, National Merit Scholars, Arizona Regents Academic Scholars, Flinn Scholars, Medallion of Merit Scholars and Leadership Scholars - as well as numerous other scholarship, fellowship and grant recipients. Special thanks to the ASU Office of Undergraduate Admissions for the use of the photograph featured on the cover.
ARIZONA BOARD OF REGENTS EX OFFICIO
Jane Dee Hull, Governor of Arizona Lisa Graham Keegan, Superintendent of Public Instruction APPOINTED George H. Amos III Rudy Campbell Judy Gignac Chris Herstam Jack Jewett Kay McKay John F. Munger Jennifer Reichelt Don Ulrich
ARIZONA STATE UNIVERSITY ADMINISTRATION
Lattie F. Coor, President Milton D. Glick, Senior Vice President and Provost Elaine P. Maimon, Provost and Vice President for ASU West Charles E. Backus, Provost for ASU East Christine K. Wilkinson, Vice President Allan H. Price, Vice President for Institutional Advancement Mernoy E. Harrison, Jr. Vice Provost for Administrative Services
Gerald E. Snyder, Comptroller and Treasurer
FINANCIAL REPORT
1998
CONTENTS
ARIZONA BOARD OF REGENTS AND ARIZONA STATE UNIVERSITY ADMINISTRATION....................................................................... 2
F I N A N C I A L HIGHLIGHTS................................................................................................
4-5
ENROLLMENT...................................................................................................................
6
P E R C E N TA G E COMPOSITIONS......................................................................................
7
C O M B I N E D SOURCES AND USES OF FUNDS...............................................................
8-9
B A L A N C E SHEET..............................................................................................................
10
S TAT E M E N T OF CHANGES IN FUND BALANCES.........................................................
12
S TAT E M E N T OF CURRENT OPERATING FUNDS REVENUES, EXPENDITURES, AND OTHER CHANGES................................................
14
S U M M A RY OF SIGNIFICANT ACCOUNTING POLICIES...............................................
15
N O T E S TO FINANCIAL STATEMENTS...........................................................................
16
I N D E P E N D E N T AUDITORS REPORT..............................................................................
20
Arizona State University 3
FINANCIAL HIGHLIGHTS
Funding Sources and Uses
Funding Sources(Resources acquired during the year) State Appropriations Tuition and Fees Gifts, Grants, and Contracts Auxiliary Enterprises Operations Other Sources Total Funding Sources Funding Uses(Resources consumed during the year) Instruction and Academic Support Research and Public Service Student Services and Institutional Support Operation and Maintenance of Plant Auxiliary Enterprises Operations Scholarships and Fellowships Facility Additions, Debt Service, and Other Uses Total Funding Uses $ 297.3 85.4 79.9 37.4 62.7 63.0 65.3 $ 691.0 $ 275.8 78.1 71.6 35.9 59.4 54.7 64.3 $ 639.8 8% 9 12 4 6 15 2 8%
Fiscal Year 1998 1997
(Dollars in Millions) $ 287.2 177.2 137.0 75.0 42.6 $ 719.0 $ 260.0 162.9 124.6 71.0 35.6 $ 654.1
Percentage Change
10 % 9 10 6 20 10 %
The above table is an overview of total University financial operations; current operating and non-operating funds are included. Total funding sources increased 10% due to increases in all funding source categories. The largest percentage increase was the 20% increase in other sources primarily due to a one-time $5.5 million net increase in fair value in the endowment fund related to prior years. This was the result of ASU adopting for fiscal 1998 Governmental Accounting Standards Board (GASB) Statement No. 31, which became effective for fiscal 1998. GASB Statement 31 requires that investments be reported at fair value which is typically the quoted market price rather than at cost. The endowment fund also recorded $6.6 million of net increase in fair value relating to fiscal 1998 activity, a $1.2 million increase over fiscal 1997. The state appropriations category increased 10% due to a $23.1 million increase in the general operating fund appropriations and a $4.1 million increase in capital outlay appropriations. The increase in the general fund appropriations was primarily to support instruction related expenditures in the colleges related to enrollment growth and various strategic initiatives. The gifts, grants and contracts category increased 10% due to increased federal and state grants as well as a small increase in private gifts. Federal grants increased $8.7 million due to a $2.0 million funding increase by the National Science Foundation affecting various projects as well as a $1.1 million funding increase by the Jet Propulsion Laboratory/NASA for the Mars Observer and Global Surveyor Thermal Emission Spectrometer Project. There were numerous other federal grants which received funding increases of less than $1.0 million. Federal Pell financial aid grants increased by $1.3 million. There was a $2.2 million increase in state grants primarily due to increased funding for tobacco education and prevention programs revenues. Tuition and fees increased 9% due to increases in enrollment growth for both in-state and out-state students, as well as increases in the rate charged for tuition and fees. The increase in tuition was used to address institutional needs not covered by the general operating fund appropriations as well as to increase funding for university scholarships and grants. The auxiliary enterprises operations category increased 6%, or $4.0 million, primarily due to revenue increases for Public Events, Bookstore, Memorial Union and Parking. Public Events revenues increased $1.3 million as the result of a highly successful season for Valley Broadway Series events at ASUs Gammage Auditorium. Shows staged at Gammage Auditorium during fiscal 1998 included Showboat, Rent, Lord of the Dance, and Chicago. 4 Arizona State University
Total funding uses increased 8% between years with increases in all categories. The scholarships and fellowships category had the largest increase, 15%, primarily due to increases in tuition waivers and in scholarships and financial aid grants awarded, including an increase of almost $1.0 million in a university funded scholarship program for undergraduates enrolled at ASU who graduated in the top 15% of their high school senior class. Pell financial aid grant expenditures increased by $1.3 million. The student services and institutional support category increased 12%. Student services expenditures increased by 15% due to increases in several areas including student advising, student counseling and consultation, student information systems, undergraduate admissions, student health, student development, and co-curricular programs. Institutional support expenditures primarily increased in the areas of administrative information management/technology and institutional advancement. The research and public service category increased 9% due to increased expenditures relating to federal and state funded grants and contracts. The instruction and academic support category increased 8%, or $21.5 million, with the majority of the increase resulting from a $16.2 million increase in instruction expenditures. Areas with significant increases in instruction expenditures included interdisciplinary instruction, mathematics, english, biology, engineering, chemistry and biochemistry, and business. The $5.3 million increase in academic support included expenditures for activities specially designed to provide support services for instruction programs. These support services include library related expenditures, academic information technology support and academic administrative support. The auxiliary enterprises category increased 6%, due to increased expenditures by several auxiliary enterprises. The operation and maintenance of plant, and the other facility additions, debt service and other uses categories increased 4% and 2%, respectively. The Universitys objective is for sources to slightly exceed uses over a three to five year period on the basis that (1) current operating funding sources should over the long run be equal to or slightly exceed uses and (2) endowment funding sources should exceed uses in accordance with the Universitys objective of increasing, over a period of time, externally provided endowments. For any given year, total University funding sources will either exceed or be less than uses. For the five years ended June 30, 1998, total University funding sources exceeded uses by slightly less than 3%, with a significant portion of this increase occurring in the restricted endowment funds.
Financial Position
Fiscal Year 1998 1997
(Dollars in Millions) Assets (Resources available to provide future services or to pay obligations) Property, Buildings, and Equipment Other Assets (cash, investments, receivables, and deferred expenses) Total Assets Liabilities (Obligations requiring cash or other resources in the future) Bonds Payable and Other Long-term Obligations Other Liabilities (accounts payable, deferred revenue, and deposits) Total Liabilities Fund Balances (Resources available after obligations for providing of future services) Available for Current Operations: Restricted (must be spent as specified by external parties) Designated (may be spent as determined by University Administration) Restricted or Specified for Non-operating Purposes (bond reserves, student loans, endowments, and construction projects) Total Fund Balances before Net Investment in Plant Invested in Property, Buildings, and Equipment (property costs net of bonds payable and other long-term obligations) Total Fund Balances
Percentage Change
$ 1,215.5 259.1 $ 1,474.6
$ 1,196.2 224.5 $ 1,420.7
2 15 4
%
%
$
275.5 55.2 330.7
$
288.6 49.4 338.0
(5) % 12 (2) %
$
$
$
4.5 72.8
$
4.1 64.7
10 13
%
114.0
94.5
21
$
191.3
$
163.3
17
%
952.6 $ 1,143.9
919.4 $ 1,082.7
4 6 %
The 4% increase in total University assets resulted from a $19.3 million net increase in property, buildings, and equipment in conjunction with a $34.6 million increase in other assets. The $19.3 million net increase in property, buildings, and equipment was primarily due to a $16.8 million increase in buildings due to several renovation projects either completed or underway in fiscal 1998. The $34.6 million increase in other assets was primarily due to a $29.1 million increase in cash and investments. Endowment fund cash and investments increased $15.0 million primarily due to $12.1 million of net increase in fair value realized when endowment investments were converted from cost to fair value basis during fiscal 1998 in accordance with GASB Statement No. 31. Fair value typically is the quoted market price for investments. Included in the $12.1 million of net increase in fair value is $6.6 million relating to current year activity and $5.5 million relating to prior years. There was also a $7.5 million increase in cash and investments in the current operating funds. All other assets categories with the exception of donated land showed increases during fiscal 1998.
The 2% decrease in total liabilities was due to a $13.1 million decrease in bonds payable and other long-term obligations. The decrease in bonds payable and other long-term obligations was primarily due to principal being retired in fiscal 1998. Total fund balances increased 6% primarily due to the Universitys additional $33.2 million net investment in property, buildings, and equipment during fiscal 1998. This increase consisted of $31.9 million of equipment and library acquisitions funded by current operating funds. All fund groups had fund balance increases during fiscal 1998. Most notable was the $14.4 million increase in the endowment fund primarily due to the $12.1 million net increase in fair value mentioned above. Current operating funds increased $8.5 million primarily due to increases in the designated and auxiliary enterprises funds.
Arizona State University 5
ENROLLMENT
49,243 47,051 45,766 44,550 39,148 37,985 39,553 40,910 45,929 43,105
Full-Time Equivalent Students Total Headcount
Fall
1993
1994
1995
1996
1997
Degrees Conferred for Academic Year 1997-98
Bachelors Masters Doctors 7,261 2,359 418 10,038
Fall, 1997 Enrollment
Undergraduate Graduate In-State Out-of-State 37,132 12,111 36,427 12,816
6 Arizona State University
PERCENTAGE COMPOSITIONS
General Operating Fund
Revenue Sources
Other Sources 1%
Unrestricted Current Operating Funds
Revenue Sources
Gifts, Grants, and Contracts 4%
Tuition and Fees 28%
Tuition and Fees 31%
State Appropriations 71%
State Appropriations 48%
Auxiliary Enterprises and Other Sources 17%
Uses - By Expenditure Category
P a y r o l l Taxes and Fringe Benefits 11% Other Operating 19%
Uses - By Expenditure Category
P a y r o l l Taxes and Fringe Benefits 10% Other Operating 28%
Personal Services 63%
Personal Services 56%
Travel 1% Capital 6%
Travel 1% Capital 5%
Uses - By Program
Operation and M a i n t e n a n c e of Plant 9% Institutional Support 8% Student Services 6% Research and Public Service 4% Scholarships and Fellowships 5%
Uses - By Program
Operation and M a i n t e n a n c e of Plant 7% Institutional Support 10% Student Services 5% Research and Public Service 4% Scholarships and Fellowships 6% Auxiliary Enterprises 12%
Instruction and Academic Support 68%
Instruction and Academic Support 56%
Arizona State University 7
COMBINED SOURCES AND USES OF FUNDS
Sources
For the year ended June 30, 1998 (Dollars in Millions)
S t a t e Appropriations 40% $287.2 Represents State of Arizona legislative appropriations for current operations of the University and capital outlay of $8.1 million. Includes $11.7 million for summer sessions and $27.1 million of waivers, consisting of $25.1 million for scholarships and fellowships and $2.0 million for faculty and staff benefits.
Tuition and Fees 25%
177.2
Gifts, Grants, and Contracts 19% 137.0 Consists of research and educational service agreements, scholarships, endowments, and plant facility additions. Includes $92.6 million of Federal grants and contracts, $7.0 million of state grants and contracts, and $1.8 million of local government grants and contracts. Represents operations of essentially self-supporting activities such as bookstore, intercollegiate athletics, residence halls, and parking.
A u x i l i a r y Enterprises 10% 75.0
I n v e s t m e n t and Endowment Income 3%
22.5
O t h e r Sources 3%
Consists of earnings from short-term investments on collections in advance of expenditures, long-term investments of endowment and bond retirement funds, and changes in fair value of endowment investments. Fair value typically is the quoted market price for investments. Consists primarily of departmental sales and services.
20.1
$719.0
Note: The Combined Sources and Uses of Funds statement highlights major financial data. The explanations provided are not intended to be all-inclusive. This statement provides an overview of total University financial operations including the ASU Main, ASU West and ASU East Campuses. Restricted and unrestricted current operating and non-operating funds are included. Restricted funds have specific purposes stipulated by outside donors and agencies. Non-operating funds consist of the student loan, endowment, unexpended plant, and debt service funds. The investment in plant fund is not included, except for property gifts, since plant acquisitions are typically shown as a use of funds in either the current operating funds or unexpended plant fund at the time of acquisition. The non-operating funds generally are not available for use at the discretion of the University. Sources and uses are allocated and controlled by budgets.
8 Arizona State University
Uses
Instruction and Academic Support 43%
$297.3 Consists of (1) instruction expenditures totaling $217.8 million, which include credit and non-credit courses for academic, occupational, and vocational instruction for regular academic year and summer sessions, and continuing education, and (2) academic support expenditures totaling $79.5 million, which include libraries, academic information technology support and academic administration.
Research and Public Service 12% 85.4 Represents (1) activities specifically organized to produce research outcomes, whether funded by external agencies or separately budgeted by organizational units within the University, and (2) public service expenditures of $27.8 million for non-instructional services beneficial to individuals and groups external to the University, such as public broadcasting and public events.
Student Services and Institutional Support 12% 79.9 Consists of (1) student services expenditures totaling $28.7 million, which include admissions, registrar, student activities, counseling, career guidance, student aid administration, and student health services, and (2) institutional support expenditures totaling $51.2 million, which include executive management, financial operations, human resources, public safety, community relations, administrative information technology support, and alumni relations. 5% 37.4 Represents expenditures for the operation and maintenance of plant, exclusive of amounts charged to auxiliary enterprises, including services related to facilities and grounds, and utility costs. 63.0 Includes grants paid from the restricted fund, and tuition and fee waivers awarded to students enrolled in formal course work, with the students not being required to perform personal services or repay the awards. 62.7 Consists of departments managed as essentially self-supporting activities that furnish services to students and staff for a fee directly related to, but not necessarily equal to, the cost of the service. 46.9 Represents (1) additions to physical facilities of $17.3 million funded from the unexpended plant fund and $1.0 million of property gifts (excludes $31.9 million of property additions charged to current funds, since such uses have already been reflected in the above programs), and (2) debt servicing payments, totaling $28.6 million, consisting of $15.4 million of interest payments and $13.2 million of principal retired.
Operation and Maintenance of Plant
Scholarships and Fellowships 9%
A u x i l i a r y Enterprises 9%
Facility Additions and Debt Servicing 7%
O t h e r Uses 3% 18.4 Consists primarily of indirect cost recovered of $14.7 million.
Net Increase in Fund Balances
$691.0 28.0 $719.0 Arizona State University 9
BALANCE SHEET
(Dollars in Thousands) June 30,1998 (with comparative totals for 1997)
CURRENT OPERATING FUNDS Unrestricted Funds General Auxiliary Operating Designated Enterprises R e s t r i c t e d Fund Fund Fund Fund
To t al Current Operating Funds
Assets Cash and investments - Note A Accounts receivable, less allowance of $1,950 in 1998 and $1,573 in 1997 Loans receivable, less allowance of $2,095 in 1998 and $1,999 in 1997 - Note B Inventories Deferred expenses and deposits Due from other funds Donated land Property, buildings, and equipment Note C $ 11,144 164 $ 55,573 3,301 $ 11,618 6,002 $ 269 12,678 $ 78,604 22,145
3,280 4,654
5,576 274
5,576 3,554 4,654
$
11,308
$
66,808
$
23,470
$
12,947
$ 114,533
Liabilities and Fund Balances Liabilities Accounts payable and accrued expenses Deferred revenue Employee retirement and insurance deposits Other deposits Due to other funds Bonds payable - Note D Lease-purchases and other long-term obligations - Note E Fund Balances
$
3,199 2,539
$
1,293 12,390
$
2,763 5,678
$
880 2,957
$
8,135 23,564
55
870
4,654
925 4,654
$ $
5,738 5,570 11,308
$ $
13,738 53,070 66,808
$ $
9,311 14,159 23,470
$ $
8,491 4,456 12,947
$
37,278 77,255 $ 114,533
Fund Balances Consist of Restricted U.S. Government grants refundable Endowments General Designated Outstanding purchase orders and other commitments Summer sessions Quasi-endowments General Net investment in plant
$
4,456
$
4,456
$
5,560
$
3,048 50,022 $ $ 14,159 14,159 $ 4,456 $
5,560 3,048 64,191 77,255
10 $ 5,570 $
53,070
See Summary of Significant Accounting Policies and Notes to Financial Statements.
10 Arizona State University
NON-OPERATING FUNDS Student Loan Fund Endowment Fund Combined Plant Fund Agency Fund
TOTA L ALL FUNDS Memorandum Only 1998 1997
$
818 15 12,327
$
51,922 238
$
68,989 257
$
7,361 1,470
$
207,694 24,125 12,327 5,576 3,566 4,654 1,119
$
178,592 20,622 12,289 5,471 3,282 3,227 1,119
12 1,119 $ 13,160 $ 53,279 1,215,509 $ 1,284,755 $ 8,843
1,215,509 $ 1,474,570
1,196,155 $ 1,420,757
$
16
$
52
$
9,050
$
989 55 5,309 2,490
$
18,242 23,619 5,309 3,415 4,654 223,078
$
17,241 21,220 4,553 3,203 3,227 232,344
223,078 52,334 284,462 1,000,293 $ 1,284,755 $
16 13,144 $ 13,160
$
$ $
52 53,227 53,279
$ $
8,843 8,843
$
52,334 330,651 1,143,919 $ 1,474,570
$
56,238 338,026 1,082,731 $ 1,420,757
$ 10,410 2,620
$
48,958
$ $ 13,526
10,410 48,958 20,602
$
10,453 37,896 19,497
114 $ 13,144 $
4,269 53,227
34,175 952,592 $ 1,000,293
5,560 3,048 4,269 98,480 952,592 $ 1,143,919
3,928 3,203 929 87,382 919,443 $ 1,082,731
Arizona State University 11
STATEMENT OF CHANGES IN FUND BALANCES
CURRENT OPERATING FUNDS U n r e s t r i c t e d Funds Auxiliary General Enterprises Operating Designated Restricted Fund Fund Fund Fund
(Dollars in Thousands) For the year ended June 30, 1998 (with comparative totals for 1997) Revenues and Other Additions Unrestricted current revenues Restricted Governmental grants and contracts Private gifts, grants, and contracts State appropriations Financial aid trust fund Conveyance of property - Note C Investment and endowment income Interest on student loans Expended for plant facilities including $31,887 charged to current funds expenditures in 1998 and $35,618 in 1997 Retirement of indebtedness including $1,060 charged to current funds expenditures in 1998 and $725 in 1997 Other additions Total revenues and other additions
To ta l Current Operating Funds
$ 392,880
$ 103,712
$ 81,097 $ 87,791 25,405 916 1,156
$ 577,689 87,791 25,405 916 1,156
$ 392,880
$ 103,712
$ 81,097
$ 115,268
$ 692,957
Expenditures and Other Deductions Educational and general expenditures Auxiliary enterprises expenditures Indirect costs recovered Cancellation of loans and provision for bad debts Administrative and collection costs Expended for plant facilities Interest on indebtedness Retirement of plant facilities Retirement of indebtedness Other deductions Total expenditures and other deductions $ 386,330 $ 75,062 $ 62,693 $ 101,661 14,736 $ 563,053 62,693 14,736
$ 386,330
$ 75,062
$ 62,693
242 $ 116,639
242 $ 640,724
Transfers Among Funds - Additions (Deductions) Mandatory Bond indenture requirements Other mandatory transfers Voluntary, net Total transfers Net Increase for the Year Fund Balances, Beginning of Year Fund Balances, End of Year $ $ (15,705) (2,154) (6,537) $ (24,396) $ 4,254 48,816 $ 53,070 $ (6,657) (103) (9,414) $ (16,174) $ 2,230 11,929 $ 14,159 $ $ (22,362) (5,633) (15,726) $ (43,721) $ 8,512 68,743 $ 77,255
$ $ $
(4,915) (4,915) 1,635 3,935 5,570
$ $ $
1,539 225 1,764 393 4,063 4,456
See Summary of Significant Accounting Policies and Notes to Financial Statements. 12 Arizona State University
NON-OPERATING FUNDS Student Loan Fund Endowment Fund Unexpended Plant Fund
TOTA L ALL FUNDS Combined Plant Funds Memorandum Only 1998 1997
Plant Funds Debt Investment Service in Plant Fund Fund
$ $ 24 $ 61 749 8,087 $ 61 1,722 8,087
577,689 87,876 27,530 8,087 1,832 15,246 342
$
533,615 78,651 27,434 3,964 1,646 56,360 8,164 383
$
403 916
$
973
46 342
13,083
$
961
961
49,167
49,167
49,167
51,360
$
69 481
$ 14,402
$
309 9,206
$
58 1,019
14,259 2,007 $ 66,406
$
14,259 2,374 76,631
$
14,259 2,443 784,471
$
14,302 219 776,098
$
563,053 62,693 14,736 354 118 17,280 15,444 31,250 13,199 5,156 723,283
$
516,125 59,352 13,799 376 209 15,742 16,100 22,407 13,577 3,289 660,976
$
354 118
$ 17,280
$ 15,444 13,199 59 $ 28,702
$ $ 31,250 2,007 $ 33,257
$
10 482
2,838 $ 20,118
$
17,280 15,444 31,250 13,199 4,904 82,077
$
$
$ $ $
8 8 7 13,137 $ 14,402 38,825 $ 53,227
$
85 15,048 $ 15,133 4,221 29,301
$ 22,362 5,540 678 $ 28,580 $ 897 13,282 $ 14,179 $ 33,149 919,443 $ 952,592
$
$ $
22,362 5,625 15,726 43,713 38,267 962,026 $ 61,188 1,082,731 $ 1,143,919 $ 115,122 967,609 $ 1,082,731
$
$ 13,144
$ 33,522
$ 1,000,293
STATEMENT OF CURRENT OPERATING FUNDS R E V E N U E S , EXPENDITURES, AND OTHER CHANGES
(Dollars in Thousands) For the year ended June 30,1998 (with comparative totals for 1997) U n r e s t r i c t e d Funds Auxiliary General Designated Enterprises Operating Fund Fund Fund Revenues State appropriations Tuition and fees Collected Value of waivers Governmental grants and contracts Private gifts, grants, and contracts Financial aid trust fund Investment and endowment income Sales and services of auxiliary enterprises Internal services, less related expenditures of $32,487 in 1998 and $34,466 in 1997 Other sources Total revenues $ 279,145 92,260 19,216 $ 55,771 7,862 13,576 5,491 7,305 $ 2,081 $ 75,570 24,204 869 1,018 $ 279,145 150,112 27,078 89,146 32,188 869 8,327 75,022 $ 256,071 138,382 24,561 79,586 30,480 697 8,052 70,955
Restricted Fund
To t a l Current O p e r a t i n g Funds Memorandum Only 1998 1997
2,493 4 75,022
1,497 2,259 $ 392,880 13,707 $103,712 $ 81,097 $ 101,661
1,497 15,966 $ 679,350
1,571 16,438 $ 626,793
E x p e n d i t u r e s and Mandatory Transfers Educational and general Instruction Research Public service Academic support Student services Institutional support Operation and maintenance of plant Scholarships and fellowships Educational and general expenditures Mandatory transfers Total educational and general Auxiliary enterprises Expenditures Mandatory transfers Total auxiliary enterprises Total expenditures and mandatory transfers Other Transfers and Additions (Deductions) Restricted receipts under transfers to revenues Voluntary transfers, net Other Net Increase in Fund Balances $ 1,635 $ $ (6,537) $ (9,414) (1,129) 225 (242) 393 $ (1,129) (15,726) (242) 8,512 $ (1,614) (12,158) (137) 9,630 $ 199,924 11,093 2,367 64,190 21,477 32,713 36,581 17,985 $ 386,330 4,915 $ 391,245 $ 13,759 7,324 2,090 14,662 4,762 18,149 326 13,990 $ 75,062 17,859 $ 92,921 $ 4,139 39,197 23,343 648 2,459 312 512 31,051 $ 101,661 (1,539) $ 100,122 $ 217,822 57,614 27,800 79,500 28,698 51,174 37,419 63,026 $ 563,053 21,235 $ 584,288 $ 201,619 50,673 27,416 74,214 24,977 46,613 35,883 54,730 $ 516,125 21,167 $ 537,292
$ 62,693 6,760 $ 69,453
$ 62,693 6,760 $ 69,453
$ 59,352 6,610 $ 65,962
$ 391,245
$ 92,921
$ 69,453
$ 100,122
$ 653,741
$ 603,254
$
4,254
$
2,230
$
$
$
See Summary of Significant Accounting Policies and Notes to Financial Statements.
14 Arizona State University
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
June 30, 1998 Basis of Accounting For financial reporting purposes, the University includes those funds that are directly controlled by the University. Control by the University is determined on the basis of financial accountability. Fiscal responsibility for the University remains with the State of Arizona; therefore the University is considered a part of the reporting entity for the States financial reporting purposes. The financial statements do not include the financially interrelated organizations described in Note F. The financial statements have been prepared on the accrual basis of accounting in conformity with generally accepted accounting principles applicable to governmental colleges and universities as set forth in the AICPA College Guide model as defined in Governmental Accounting Standards Board Statement No. 15. The Statement of Current Operating Funds Revenues, Expenditures, and Other Changes is a statement of financial activities of operating funds related to the current reporting period. It does not purport to present the results of operations or the net income or loss for the period as would a statement of revenues and expenses. Investments in securities are stated at fair value at June 30, 1998. Fair value typically is the quoted market price for investments. Various methods are used by Auxiliary Enterprises units to value their inventory. The ASU Bookstore inventory comprises approximately 69% of the total inventory reported on the balance sheet and is valued using the retail method. Property, buildings, and equipment are stated at cost at the date of acquisition or fair market value if donated. The University does not depreciate buildings and equipment. To the extent that current operating funds are used to finance plant assets, the amounts so provided are accounted for as (1) expenditures, in the case of normal acquisition and/or replacement of movable equipment and library books; (2) mandatory transfers, in the case of required provisions for debt amortization and interest, and equipment renewal and replacement; and (3) voluntary transfers in all other cases. Summer sessions revenues and expenditures are reported within the fiscal year in which the total summer sessions program is predominantly conducted. Accordingly, only the revenues and expenditures of the 1997 summer sessions are included in the Statement of Current Operating Funds Revenues, Expenditures, and Other Changes. Revenues and expenditures as of June 30, 1998 for the 1998 summer sessions are reported as deferred revenues and expenses on the Balance Sheet. Tuition and fees revenues (net of refunds) include $25.1 million of waivers charged to Scholarships and Fellowships and $2.0 million of waivers for faculty and staff benefits. The financial information shown for fiscal 1997 in the accompanying financial statements is included as a basis for providing comparison with fiscal 1998 and presents summarized totals only. Fund Accounting The accounts are maintained in accordance with the principles of fund accounting. These principles require that resources be classified for accounting and reporting purposes into funds in accordance with the activities or objectives specified for the resources. Accounts are separately maintained for each fund; however, in the accompanying financial statements, funds that have similar characteristics have been combined into fund groups. Description of Funds Current operating funds are used primarily to account for transactions which are expended in performing the primary and support missions of the University: instruction, research, public service, academic support, student services, institutional support, operation and maintenance of plant, scholarships and fellowships, and auxiliary enterprises. Current Operating Funds consist of the following: 1. The General Operating Fund which is used to account for transactions related to the Universitys State-appropriated budgets as approved by the Arizona State Legislature and Arizona Board of Regents. 2. The Designated Fund which is used primarily to account for transactions related to academic year tuition and fees retained by the University, the summer sessions program, the recovery of indirect costs of sponsored research programs, the recovery of administrative costs of student aid, departmental sales and services, and the use of unrestricted gifts. The resources in this fund have been designated for specific purposes by the University. 3. The Auxiliary Enterprises Fund which is used to account for transactions of substantially self-supporting activities that primarily provide services for students, faculty, and staff. Auxiliary enterprises include, but are not limited to, residence halls, food services, bookstore, and intercollegiate athletics. 4. The Restricted Fund which is used to account for current funds expended for operating purposes but restricted by donors or other outside agencies as to the specific purpose for which they may be expended. Revenues of the Restricted Fund are reported in the Statement of Current Operating Funds Revenues, Expenditures, and Other Changes only to the extent expended for current operating purposes. Amounts received in excess of expenditures are included as additions to fund balances during the year. Non-Operating Funds consist of the following: 1. The Student Loan Fund, financed primarily by the Federal government, which is used to account for loans to students. Interest is recorded on the accrual basis. Provisions of the Federal loan program stipulate that: - The University match one-third of Federal contributions; and - A portion of the loan principal and interest (ranging from 15% to 30% per year) can be cancelled and absorbed by the Federal government, if the recipient completes certain employment requirements. 2. The Endowment Fund which is used to account for permanent endowments, term endowments, and quasi-endowments. Permanent endowment funds are subject to the restrictions of donor gift instruments requiring that the principal be invested in perpetuity and that only the income be used. Term endowment funds provide that, upon the passage of a stated period of time or the occurrence of a particular event, all or part of the principal may be expended. Quasi-endowment funds have been established by the University for the same purposes as endowment funds; any portion of such funds may be expended. Restricted quasi-endowment funds must be expended according to donor specified purposes; unrestricted quasi-endowment funds, however, may be expended as determined by the University. 3. The Plant Funds which are used to account for the transactions relating to investment in University properties. They include the (1) Unexpended Plant Fund, (2) Debt Service Fund, and (3) Investment in Plant Fund. The Unexpended Plant Fund represents amounts which have been appropriated or designated for purchases of land, improvements, buildings, and equipment. The Debt Service Fund represents funds set aside to provide for payments of indebtedness primarily pursuant to terms of bond and trust indentures. The Investment in Plant Fund represents the total of property, buildings, equipment, and related liabilities. 4. The Agency Fund which is used to account for assets held by the University as custodian or fiscal agent for others; therefore, the transactions of this fund do not affect the Statement of Changes in Fund Balances.
Arizona State University 15
June 30, 1998
NOTES TO FINANCIAL STATEMENTS
N o t e A - Cash and Investments Under Arizona State law and Board of Regents policies, the University may invest its operating funds only in the State of Arizona Local Government Investment Pool, collateralized time certificates of deposit or repurchase agreements, U.S. Treasury securities, or other Federal agency securities. Gift and endowment funds may be invested under the direction of an investment committee in such a manner as to obtain the most favorable rate of return and income stability commensurate with safety of principal. Bond trustee funds are invested by the bond trustee in accordance with the financing indenture. A summary of the components of cashdand investments at June 30, 1998 by management area follows (Dollars in Thousands): Bon trustee funds: Fair Value Money market portfolios and cash............................................ $ Guaranteed Investment Contracts............................................ U.S. Treasury and other Federal agency securities................................................................. Endowment funds: The Vanguard Group................................................................. Metropolitan Life Insurance Corporation................................... The Common Fund..................................................................... Arizona Universities financial aid trust fund endowment.......................................................... Sun Angel Foundation............................................................... Pooled cash and short-term investments: State of Arizona Local Government Investment Pool, net of bank balance..................................................... U.S. Treasury and other Federal agency securities................................................................. $ 21,346 5,893 2,572 28,700 6,601 6,311 9,687 674 124,887 1,023 207,694
Bond trustee funds. The bond trustee funds are managed by Bank of New York, Bank One, and US Bank, and generally consist of U.S Government securities (Treasury securities or other Federal agency securities), cash, certificates of deposit, and Federal money market accounts. Each banks trust department purchases U.S. Government securities for the University. U.S. Government securities are held by either the Federal Reserve Bank or the Depository Trust Company (DTC) in custodial accounts for Bank of New York, Bank One, and US Bank, in computerized book-entry systems in which changes of financial institutions interests are recorded. In turn, changes in the Universitys ownership interests are recorded in Bank of New Yorks, Bank Ones, and US Banks records. Generally, funds not directly invested in U.S. Government securities are invested in pooled Federal money market accounts in which securities are purchased and held by the trustee. Occasionally, small cash balances are maintained, or certificates of deposit are purchased by the banks trust department. For cash and certificates of deposit, book-entry pledges of Federal government securities are obtained as collateral and held by the trust department on a pooled basis. In conjunction with the ASU West lease-purchase financing, there is a $5,447,000 reserve fund maintained in a guaranteed investment contract (GIC). This GIC is from a major insurance firm and if the bond rating of this firm should fall to A- or below, the firm must provide U.S. Treasury securities as collateral for the GIC to the Universitys bond trustee. Endowment funds. The Vanguard Group investments are in four index equity funds: Institutional (Standard and Poors 500) Index Fund, Extended Market Portfolio, Small Capitalization Stock Portfolio, and Total International Portfolio. The Vanguard Group is a mutual fund company offering over 90 portfolios. The Metropolitan Life investments are in the MetLife South Station Fund which invests in publicly traded fixed income securities. The Common Fund endowment investment are in that organizations Multi-Strategy Bond Fund. The Common Fund is a unique, nonprofit membership organization which provides investment management services exclusively for educational institutions and has approximately 900 member colleges, universities, and independent schools participating in various pooled equity and debt funds. The financial aid trust fund is funded from student fees and by the Arizona State Legislature. The fund is managed in a pool by the University of Arizona along with the financial aid trust funds for the other two state universities. The Sun Angel Foundation manages a portion of ASUs endowment funds in equity and bond securities pursuant to a trust agreement. Pooled cash and short-term investments. Pooled cash and short-term investments at June 30, 1998 were principally with the State of Arizona Local Government Investment Pool. The Universitys investment in the pool represents shares in that pools portfolio. The shares are not identified with specific investments and are not subject to custodial credit risk. The University sometimes also has investments in collateralized repurchase agreements, U.S. Treasury securities, and Federal agency securities. Repurchase agreements are with various major financial institutions under master agreements with the University. For repurchase agreements with a duration of over two weeks, the University has underlying securities transferred to Bank of Americas Treasury Management Department. U.S. Treasury and Federal agency securities are held in the banks custodial account with the Federal Reserve Bank or DTC and in the Universitys name in the banks records. These securities are either purchased from a broker/dealer or a financial institution. The Universitys bank and collected (portion of bank balance available for investment) balances at the bank at June 30, 1998 were $5,264,000 and $375,000 respectively, and the carrying value of deposits on the Universitys accounting system was a deficit $1,933,000. The carrying value of deposits balance has been netted against the State of Arizona Local Government Investment Pool in the above table. The cash deficit balance on the accounting system occurs because cash is not transferred from investments to the bank account until outstanding checks are expected to be presented to the bank for payment. The Universitys deposits are fully collateralized with governmental securities (U.S. or investment grade municipals) held by either the banks agent or the banks agents custodial account with either the Federal Reserve or the DTC in the Universitys name. Effective for the year ended June 30, 1998, the University adopted the provisions of the Governmental Accounting Standards Board Statement No. 31, which became effective for fiscal years beginning after June 15, 1997. This Statement requires that investments be reported at fair value rather than at cost. Fair value typically is the quoted market price for investments. Statement No. 31 also requires that changes during the year in fair value be part of the reported investment income. Therefore, included in the Universitys endowment fund investment income for the year ended June 30, 1998 is $5.5 million of net increase in fair value related to prior years and $6.6 million of net increase in fair value that occurred during the year. The University has not restated beginning of year fund balances for the effect of this accounting change because it does not have a significant effect on the accompanying financial statements taken as a whole. Note B - Loans Receivable Loans receivable from students bear interest primarily at 3% to 5% and are generally repayable in installments to the University over a five-to-ten year period commencing six to nine months from date of separation from the University. The University provides an allowance for estimated uncollectible amounts and related collection costs. 16 Arizona State University
Note C - Property, Buildings, and Equipment Property, buildings, and equipment at June 30, 1998 consist of the following (Dollars in Thousands): Land and Improvements................................................................................................ Buildings........................................................................................................................ Equipment...................................................................................................................... Library books, media, and works of art........................................................................ $ 123,249 720,062 239,767 132,431 $ 1,215,509
The Unexpended Plant Fund balance is committed for projects planned and under construction and for future building repairs and equipment replacements. Future commitments approximate $33.5 million at June 30, 1998. In October 1996, the Federal Government conveyed to the University a portion of the former Williams Air Force Base which is used by the University as the ASU East Campus. The property transfer is conditional upon the use of the property being for educational purposes in accordance with the terms of the deed. The appraised fair value of the property conveyed was $56.4 million and consisted of 61 multi-purpose use buildings and 177 single family residences valued at $45.3 million, site improvements valued at $3.5 million, and 279.1 acres of land valued at $7.6 million. The University recorded on its records this conveyed property at the time of title transfer at its appraised value. This was the initial conveyance in what the University anticipates to be a two-phase transfer of title to the property it occupies as the ASU East Campus. The appraised fair value of the property yet to be conveyed is $33.3 million, and includes 4 multi-purpose use buildings, 390 single family residences and 312.9 acres of land. The University will record these remaining assets at the time they are conveyed by the Federal Government. As of September 4, 1998, only the initial conveyance totaling $56.4 million had occurred. Note D - Bonds Payable Bonds payable at June 30, 1998 consist of the following (Dollars in Thousands): Average Interest Rates 2.75% to 5.50% 7.09% 7.13% 6.25% 5.88% 4.93% Final Maturities (Calendar Year) 2000-2006 2004 2005 2015 2019 2008 Outstanding Principal $ 2,823 11,365 7,900 29,410 148,440 23,140 $ 223,078
Housing revenue bonds 1989 System revenue bonds 1991 System revenue bonds 1992 System revenue refunding bonds 1992A System revenue refunding bonds 1993 System revenue refunding bonds
In prior years, certain system revenue bonds of the University were also in substance defeased through advance refundings by depositing sufficient U.S. Government securities to pay all future debt service in an irrevocable trust. Accordingly, the liabilities for these defeased bonds are not included in the Universitys financial statements. The principal amount of all refunded bonds outstanding at June 30, 1998 was $76,950,000. The housing revenue bonds are payable from housing revenues as defined in the bond indentures. The 1992, 1992A, and 1993 Syste m revenue refunding bonds, and the outstanding 1989 and 1991 System revenue bonds are payable from Main Campus tuition and fees, certain auxiliary enterprises revenues, and certain other revenues as defined in the bond indentures. Securities and cash restricted for bond retirement funds and maintenance and replacement reserves held by trustees at June 30, 1998 totaled $17,207,000. A schedule of future debt service funding commitments, including interest, for bonds outstanding follows (Dollars in Thousands): Housing Revenue Bonds $ 550 557 490 492 383 671 $ 3,143 System Revenue Bonds $ 21,884 20,761 20,733 20,703 20,795 228,695 $ 333,571
Fiscal 1999 2000 2001 2002 2003 Thereafter
$
Total 22,434 21,318 21,223 21,195 21,178 229,366 $ 336,714
Note E - Lease-Purchases and Other Long-Term Obligations Lease-purchases and other long-term obligations at June 30, 1998 consisted of the following (Dollars in Thousands): Average Interest Rates 5.18% 7.64% 6.89% 4.88% to 12.01% Final Maturities (Calendar Year) 2009 1998 2010 2003 $ Outstanding Principal $ 44,270 2,270 3,710 2,084 52,334
Lease-Purchase Certificates of Participation: 1993 ASU West Refunding 1989 ASU West Construction 1991 Towers Project (through ASU Foundation) Other Lease-Purchases and Installment Purchases
Arizona State University 17
NOTES TO FINANCIAL STATEMENTS
In prior years, certain certificates of participation of the University were in substance defeased through advance refundings by depositing sufficient U.S. Government securities to pay all future debt service in an irrevocable trust. Accordingly, the liabilities for these defeased certificates of participation are not included in the Universitys financial statements. The principal amount of all refunded certificates of participation outstanding at June 30, 1998 was $39,685,000. Securities and cash restricted for non-bond retirement funds and maintenance and replacement reserves held by trustees at June 30, 1998 totaled $12,589,000. A schedule of funding commitments for lease-purchases and other long-term obligations follows (Dollars in Thousands): Certificates of Participation ASU West To w e r s Refunding Project $ 5,278 $ 444 5,250 441 5,244 443 5,243 442 5,242 446 31,450 3,102 $ 57,707 $ 5,318
Fiscal 1999 2000 2001 2002 2003 Thereafter
Other $ 409 365 350 328 263 706 $ 2,421
Total $ 6,131 6,056 6,037 6,013 5,951 35,258 $ 65,446
Note F - Financially Interrelated Organizations Not included in the financial statements of the University are six financially interrelated organizations that are nonprofit corporations controlled by separate Boards of Directors whose goals are to support Arizona State University. Financial statements of these organizations are audited by independent auditors. Four of these financially interrelated organizations the Arizona State University Alumni Association, Arizona State University Foundation, Sun Angel Foundation, and Sun Angel Endowment receive funds primarily through donations and dues, and contribute funds to the University for support of various programs. A fifth financially interrelated organization, Price-Elliott Research Park, Inc. (Park), is developing a research park to promote and support research activities, in coordination with the University. In developing the research park, the Park has issued bonds guaranteed by the University. As of June 30, 1998, the Park had $18,320,000 of revenue bonds outstanding at an average interest rate of 5.26%. The debt service on the bonds is secured by a subordinated lien on ASU Main Campus revenues. Park revenues are not pledged in order to provide development flex ibility to the Park. During fiscal year 1998, the University sold a right of way to the Arizona Department of Transportation for the construction of a freeway, consisting of 9.3 of the 324.0 acres comprising the Park. Pursuant to the lease agreement between the Park and University, $1,963,000 representing the value of the land was distributed to the University. The University, pursuant to legal authority previously granted to it by a debt service assurance agreement for payment security on the Parks refunding bonds, deposited the $1,963,000 and accumulated interest of $44,000 in an irrevocable trust with an escrow agent to fund selected future debt service payments on the bonds. The funds were invested in U.S. Government Securities and have defeased $2,055,000 of outstanding bonds, with the liability for this amount of bonds removed from the Parks financial statements. Annual debt service on the Park bonds will be $997,000 in fiscal year 1999 and varies from a low of $898,000 in fiscal 2004 to a high of $1,698,000 in fiscal 2006. The University is obligated to pay the annual debt service, if not paid by the Park, under a debt service assurance agreement. During fiscal 1998, the University provided the Park net cash transfers totaling $543,000. The cash transfers constitute operating cash advances and are repayable with interest to the University (1) upon the Parks total gross receipts for a fiscal year exceeding its total disbursements for that fiscal year and (2) before any Park surpluses are transferred to the Arizona State University Foundation. Total cash advances repayable to the University at June 30, 1998, including the accrued interest, totaled $8,473,000. Due to the Parks repayment to the University being dependent upon successful future operations, the amount owed by the Park is not recorded as an asset on the Universitys balance sheet. A sixth financially interrelated organization, the Collegiate Golf Foundation, operates a University owned golf course. Assets, net assets, and revenues for these organizations for the most recent fiscal years for which audits have been completed aggregated $147.6 million, $107.4 million, and $70.0 million, respectively, with substantially all of the net assets being donor restricted or endowment funds. The Sun Devil Club, a financially interrelated organization reported in prior years, has discontinued operations. Effective July 1, 1997, the gift raising, membership support, and other related responsibilities previously performed by the Sun Devil Club have been assumed by the Sun Angel Foundation. Note G - General Operating Fund Beginning in fiscal 1995, the University has received a separate appropriation from the Arizona State Legislature for the ASU East Campus. This appropriation along with the separate appropriation for the ASU West Campus (since 1985) are combined with the ASU Main Campus appropriation to constitute the General Operating Fund. Separation of the General Operating Fund between campuses for fiscal 1998 is as follows (Dollars in Thousands): Main West East Total State appropriations................................. $ 236,145 $ 35,946 $ 7,054 $ 279,145 Tuition, fees and other revenues............. 105,268 6,521 1,946 113,735 Total Revenues..................... $ 341,413 $ 42,467 $ 9,000 $ 392,880 Expenditures............................................ 339,781 37,570 8,979 386,330 Mandatory transfers................................ 4,915 4,915 Net Increase (Decrease) for the Year $ 1,632 $ (18) $ 21 $ 1,635 Fund Balances, Beginning of Year........... 2,921 991 23 3,935 Fund Balances, End of Year.................... $ 4,553 $ 973 $ 44 $ 5,570 Fund Balances consist of: Outstanding purchase orders and other commitments............................ $ General................................................. $ 18 Arizona State University
4,545 8 4,553
$ $
972 1 973
$ $
43 1 44
$ $
5,560 10 5,570
Note H - Retirement Plans The University participates in one cost-sharing multiple-employer defined benefit pension plan and four defined contribution pension plans. The following disclosures are required by GASB Statement No. 27, Accounting for Pensions by State and Local Governmental Employers. Defined Benefit Plan Plan Description. The Arizona State Retirement System (ASRS) administers a cost-sharing multiple-employer defined benefit pension plan that covers eligible employees of the University. Benefits are established by state statute and provide retirement, death, long-term disability, survivor, and health insurance premium benefits. The ASRS is governed by the Arizona State Retirement System Board according to the provisions of Arizona Revised Statutes (A.R.S.) Title 38, Chapter 5, Article 2. The ASRS issues a publicly available financial report that includes its financial statements and required supplementary information. That report may be obtained by writing to the ASRS, 3300 North Central Avenue, P.O. Box 33910, Phoenix, Arizona 85067-3910 or by calling (602) 240-2000 or (800) 621-3778. Funding Policy. For the year ended June 30, 1998, active ASRS members and the University were each required by statute to contribute at the actuarially determined rate of 3.54% (3.05% retirement and 0.49% long-term disability) of the employees annual covered payroll. The Arizona State Legislature establishes and may amend active plan members and the Universitys contribution rates. Both the University and the covered employees made the required contributions for the years ended June 30, 1998, 1997 and 1996 as follows (Dollars in Thousands):
Contributions Rates (Each) 1998 1997 1996 Defined Contribution Plans 3.54% 3.69% 3.85%
University Contributions $ 4,773 4,439 4,532
Employee Contributions $ 4,773 4,439 4,532
Total Contributions $ 9,546 8,878 9,064
Plan Description. In accordance with A.R.S. 15-1628, University faculty, academic professionals, service professionals and administrative staff have the option to participate in defined contribution pension plans. These plans are administered by independent insurance and annuity companies approved by the Arizona Board of Regents. For the year ended June 30, 1998, plans offered by the Teachers Insurance Annuity Association/College Retirement Equities Fund (TIAA/CREF), Variable Annuity Life Insurance Company (VALIC), Fidelity Investments Tax-Exempt Services Company (Fidelity), and Aetna Life Insurance and Annuity Company (Aetna) were approved by the Arizona Board of Regents. Benefits under these plans depend solely on the contributed amounts and the returns earned on the investment of those contributions. Contributions made by employees vest immediately and University contributions vest no later than after five years of full-time employment. Employee and University contributions and associated returns earned on investments may be withdrawn starting upon termination of employment, death, or retirement. The distribution of employee contributions and associated investment earnings are made in accordance with the employees contract with the applicable insurance and annuity company. University contributions and associated investment earnings must be distributed to the employee in the form of an annuity paid over the employees life. Funding Policy. The Arizona State Legislature establishes and may amend active plan members and the Universitys contribution rates. For the year ended June 30, 1998, plan members and the University were each required by statute to contribute an amount equal to 7.00% of an employees compensation. Contributions to these plans for year ended June 30, 1998, were as follows (Dollars in Thousands): Contributions Rates (Each) TIAA/CREF VALIC Fidelity Aetna 7% 7% 7% 7% University Contributions $ 7,531 1,215 529 210 Employee Contributions $ 7,531 1,215 529 210 Total Contributions $ 15,062 2,430 1,058 420
Note I - Accrued Vacation Pay The University has not made accruals for vacation time earned, but not taken, as of fiscal year end. If the accruals for vacation pay were made, including the related employers FICA taxes, the General Operating, Designated, Auxiliary Enterprises, and Restricted Funds liabilities would be increased by approximately $7,431,000, $970,000, $1,075,000 and $762,000, respectively. University management believes that this omission does not have a significant effect on the accompanying financial statements taken as a whole. The General Operating Fund liability would be funded by the subsequent year s appropriations from the State Legislature. Note J - Other Matters Pursuant to A.R.S. 41-621, the University participates in a self-insurance program administered by the State of Arizona, Department of Administration, Risk Management Section. The States Risk Management Program covers the University, subject to certain deductibles, for risks of loss related to such situations as theft, damage and destruction of property, buildings, and equipment; errors and omissions; injuries to employees; natural disasters; and liability for acts or omissions of any nature while acting in authorized governmental or proprietary capacities and in the course and scope of employment or authorization, except as prescribed in A.R.S. 41-621. Loss risks not covered by the Risk Management Section and where the University has no insurance coverage are losses arising from contractual breaches and losses that arise out of and are directly attributable to an act or omission determined by a court to be a felony. In accordance with the disclosure requirements of Governmental Accounting Standards Board Statement No. 10, we note that judgments and claims not covered by the Risk Management Section during the three years ended June 30, 1998 have not been material to the Universitys financial statements taken as a whole. Federal grants provided to the University and accounted for in the Restricted Fund and in the Student Loan Fund are subject to review and audit by Federal agencies. In the opinion of the University, any adjustments or repayments which may be required would not be material to the overall financial condition of the University. Arizona State University 19
INDEPENDENT AUDITORS REPORT
S TAT E OF ARIZONA
D O U G L A S R . N O R T O N , C PA AUDITOR GENERAL
OFFICE
OF THE
A U D I T O R GENERAL
Independent Auditors' Report
DEBRA K. DAVENPORT, CPA DEPUTY AUDITOR GENERAL
M e m b e rs of the Arizona State Legislature The Arizona Board of Regents
We
have
audited the the
the
accompanying statements and these in we other of
balance of the changes
sheet in for
of
Arizona year
State
University current These
as
of
June
30,
1998, ments
and are an
related
changes
fund
balances then on
and
operating financial
funds stateis to
revenues, express We
expenditures, opinion our on
the
ended. Our audit.
responsibility
University's statements with free
management. our
responsibility
financial accordance
based
conducted the on made We
audit that
generally the of audit the
accepted to obtain and
auditing
standards. assurance audit in the and An
Those about
standards whether examining,
require a An
plan
and
perform are
reasonable disclosures used financial for our
financial test audit by
statements also includes as audit
material
misstatement. principles
includes financial presen-
basis,
evidence
supporting assessing as provides a
amounts the
statements. estimates tation. In our
the
accounting
significant
management, that our
well
evaluating
overall basis
statement
believe the fund for
reasonable to
opinion. in all 1998, material and the and
opinion, the in its
financial balances year
statements of and its
referred State
above
present as of
fairly, June
respects, changes other
financial the
position then
Arizona in
University with
30,
current
operating
funds
revenues,
expenditures,
changes
ended
conformity
generally
accepted
accounting
principles.
Douglas R. Norton Auditor General
September 4, 1998
20 Arizona State University